Rates climb at weekly US Treasury bill auction

As expected, the MPC voted by eight votes to one to leave rates unchanged and by nine votes to nil to maintain its money-printing programme at its current level. “The minutes of the December meeting suggest that most MPC members are still not in any great hurry to raise interest rates”.

US Federal Reserve Chairwoman, Janet Yellen stated last week that Fed interest rate increases will come slowly in the months ahead amid tepid growth overseas and divergent monetary policies between the US and other nations.

Sterling weakened against the USA dollar and the euro and British government bond prices rose.

The New York Times reported that, following the release of the jobs report, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, added his voice to the chorus of Fed officials who said it was time for the central bank to raise interest rates.

Francois Cabau, a Barclays analyst, said that the minutes “confirmed that a Bank rate hike is off the table in the short term, and as long as economic data do not pick up”.

The state-run Korea Development Institute (KDI) lowered its 2016 growth forecast from 3.1 percent to 3.0 percent, while downgrading this year’s growth outlook from 3.0 percent to 2.6 percent.

It’s surprising the pound weakened so much after the decision because officials barely changed their outlook, said Adam Cole, Royal Bank of Canada’s head of global foreign-exchange strategy.

Britons’ expectations about inflation remain nearly unchanged compared to previous months, despite consumer price falling below zero in September and remaining at -0.1 per cent in October.

“We are priced for the first hike in early-2017 and that’s already so late that the hurdle is high for rates markets rallying any further”, Cole said.

In the Monetary Policy summary report is said, “The projected return of CPI inflation to the target depends on an increase in domestic cost growth sufficient to balance the drag on prices from very subdued global inflation and past increases in the value of sterling”.

There has also been a drop over the same period in the most aggressive core PCE inflation forecasts, particularly for the first quarter of 2016, where the highest forecast has tumbled to 1.8 percent from 2.5 percent.

The minutes of the meeting showed that continuing subdued inflation was the main focus of attention for the policy makers.

“Raising rates this year will, in my view, serve to reduce monetary policy uncertainty and to keep the economy on track for sustained growth with price stability”, Mr Harker was reported as saying.