BoE keeps rates on hold for 80th month running

The Bank of England has kept rates on hold for 80 months. Picture: Anthony Devlin/PA Wire
The Bank of England has kept rates on hold for 80 months. Picture: Anthony Devlin/PA Wire
Share this article
Have your say

Bank of England (BoE) governor Mark Carney said yesterday that he still saw the need for gradual interest rate rises at some stage to get inflation back on target, but gave no signal of a monetary tightening any time soon.

The governor’s markedly more doveish tone prompted some City forecasts that it might be up to a year before the BoE raises rates from historic lows. It triggered a fall in sterling of one cent against the US dollar in currency markets.

Carney, who had previously said a decision on any rate move would come into “sharper relief” around the turn of the year, said the economic picture had changed in recent months as the global economy had slowed.

Meanwhile, the Bank said inflation, currently stuck below zero, was likely to stay under 1 per cent until the middle of next year. also seen as reducing the need for a rate rise.

On the publication of the latest minutes from the Bank of England monetary policy committee (MPC) alongside the quarterly inflation report, Carney warned the outlook for global growth had weakened since the Bank’s last inflation report in August.

He said there was a risk of a “more abrupt slowdown in China” that could hit UK growth.

It came as the latest minutes from the MPC showed members voted 8-1 to leave rates on hold, with Ian McCafferty as the sole hawk.

The BoE also slightly downgraded its forecast for economic growth to about 2.7 per cent for 2015, down from 2.8 per cent, while also cutting it next year to 2.5 per cent from 2.7 per cent.

This follows on from a summer of stock market turmoil amid concerns over China’s slowing economy. However, Carney also stressed that if rates did not rise until the first half of 2017, inflation was predicted to overshoot its 2 per cent target.

He added: “We are in a situation where we have resilient domestic demand and, even in the face of global weakness, we still see the need for gradual interest rate rises to bring inflation back to target.”

Carney said it was a “reasonable expectation” that rates may rise at some stage within the next year.