Bank of England Leaves Rate Unchanged

The bank suggested in its quarterly inflation report last month that a rise may be a year away.

Inflation may turn positive in November, officials said, however “core inflation remains subdued”, the the minutes showed.

As expected, the bank chose to hold off on adding to the £375 billion ($569 billion) of asset purchases it has unleashed over previous years and kept its main benchmark rate at a record low of 0.5 percent. At this rate, we may not have to wait too long to see Brent back at 2008 lows, around $36.20, while a break of this would see it trading at its lowest level in more than a decade.

Jessica Hinds, a European economist at Capital Economics, said she still think that further interest rate rises will be needed in 2016.

Thursday’s decision is in line with an earlier poll by Yonhap Infomax, the financial news arm of Yonhap News Agency, in which all 14 economists surveyed projected another rate freeze in December.

Traders are betting officials will keep the Bank Rate unchanged through 2016, according to forward contracts based on the sterling overnight index average, or Sonia.

The rate setters noted “existing uncertainties mostly referring to the global environment, primarily the uncertain reaction of market participants to an expected increase of interest rate by the Fed and its impact on commodities and financial markets”, the bank said in the statement. The actual path Bank Rate will follow over the next few years will depend on the economic circumstance.

United Kingdom growth is healthy – and with the prospect of a Federal Reserve rate hike next week, many see the Bank of England gearing up to tighten itself.

The recent fall in oil prices give an indication that inflation outlook of the economy will be lower than expected; therefore, BoE will not be hurry to hike rates.

The central bank has held off on increasing its interest rates, in part because price growth has been so weak.

The 10-year gilt yield fell one basis point, or 0.01 percentage point, to 1.87 per cent, after sliding to 1.82 per cent. The 2 per cent security due in September 2025 rose 0.09, or 90 pence per £1000 face amount, to 101.19.

This comes after Governor Mark Carney has already said a decision to raise rates in the USA is “not decisive” for United Kingdom policymakers, stressing any such move on these shores will be made according to United Kingdom economic conditions. Economists at Morgan Stanley say British inflation could rise to 1 percent by March, much quicker than the BoE has forecast.