UK's Bond Interest Rates still at Record Low

MPC members voted 8-1 to keep rates on hold, with only Ian McCafferty voting to raise rates.

The decision marks the 78th consecutive month of record-low interest rates. In its report, the Bank said the outlook for inflation was "muted".

 

Some economists say a rate rise could now be put off, although governor Mark Carney said it was "drawing closer".

"Those analysts who predicted a rate rise this year may be on brink of having to rip up their predictions," said Aberdeen Asset Management chief economist Lucy O'Carroll.

Many analysts had anticipated that two or three policymakers would vote for a rate increase.

But a collapsing stock market in China and continuing talks over Greece's debts mean the outlook for global growth is muted.

Energy prices fall

The central bank said it expected inflation to be back to its 2% target in two years' time.

Standing in the way of the Bank's desire for higher inflation is a drop in oil prices and energy costs in general, as well as a rise in the value of sterling, which the Bank estimates has risen 3.5% since May.

The timing for a Bank rate increase is "drawing closer", Mr Carney said in a news conference, but cannot "be predicted in advance". The decision would be determined by looking at economic data, he added, including wage growth, productivity and import figures.

The increases, when they came, would be "gradual" and limited to a level "below past averages", he said, which is in line with his previous forecasts of how rates will change.

Economy 'in need of care'

This Thursday marks the first time the Bank has released the monthly rate decision at the same time as the minutes of the Bank's Monetary Policy Committee meeting, without the hitherto normal fortnightly gap, and has been named by pundits as Super Thursday.

"It would have been imprudent to push through a rate rise at this moment when our economic recovery remains in need of care and encouragement," said John Longworth, director general of the British Chambers of Commerce.

"Rates will eventually have to rise and when they do, it should be done slowly and steadily. Until that moment, the Bank of England is right to keep interest rates at current levels."

The 8-1 decision follows months of unanimous decisions to keep rates on hold.

The UK's bond-buying programme also continued to be frozen at £375bn.

The pound fell 0.6% against the dollar to $1.5509 and the euro rose 0.7% to 70.38 pence.