Bank of England votes 8-1 to hold rates at 0.5%

The BOE’s nine-member Monetary Policy Committee voted 8-1 to keep borrowing costs at a record-low 0.5 per cent in its last decision of the year, sticking to the status quo.

Regarding the latest decision on interest rates, senior economist at Julius Baer David Meier said: “At yesterday’s December meeting the BoE’s Monetary Policy Committee (MPC) was not in the mood to rattle markets out of their comfort zone before the holiday season”. He said the recovery will regain pace after a temporary slowdown in the third quarter and inflation will bounce back next year as the peak impact of energy price falls fade.

“There was no mechanical link between United Kingdom policy and those of other central banks, and the United Kingdom policy stance would be determined ultimately by the inflation outlook here”, the minutes said. “We continue to expect a long period of stable rates”.

The November jobs figure from the Bureau of Labor Statistics was slightly ahead of expectations and meant that the unemployment rate held at its seven-and-a-half year low of five per cent.

The bank says inflation was 3.1 percent in October 2015, marginally higher than 2.9 percent in September. On the employment front, the number of persons employed has increased steadily, and in October the unemployment rate fell compared to that in October of past year while the employment-to-population ratio maintained the same level.

The New Zealand dollar and Norwegian crown were big losers to the greenback as commodity prices tumbled again and traders reckoned central banks would embark on more policy stimulus to help their economies.

MPC member Ian McCafferty has been the lone policymaker calling for a rise since August and is unlikely to be joined by fellow rate-setters this month.

“The actual path Bank Rate will follow over the next few years will depend on the economic circumstance”, the BoE added. Any Direct student loans issued before 2006 were variable rate student loans, and increases in interest rates will cause your rates to rise.

The MPC said prospects for global and domestic activity hadn’t changed that much since the November meeting and noted that “the more material news on the month had been in costs”. Fixed rate loans won’t be affected by any interest rate adjustment, but any variable rate loans will see interest rates increase, likely in the same increments as the Federal Reserve chooses to raise rates over the coming months.

“We suspect that decent United Kingdom economic growth, stronger earnings growth overall and consumer price inflation gradually trending up will prompt the MPC to act around May”.