MPC votes 8-1 to maintain Bank Rate

At its latest meeting, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%.

Related topics:  Finance News
Rozi Jones
10th December 2015
bank of england boe

As in previous months, there is a range of views among MPC members about the balance of risks to inflation relative to the target in the medium term. Ian McCafferty voted to increase Bank Rate by 25 basis points, given his view that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term than was embodied in the Committee’s collective November projections.

Twelve-month CPI inflation remained at -0.1% in October, a little more than 2 percentage points below the inflation target. Inflation is expected to have been slightly positive in November, and is projected to rise further as some of the large falls in energy and food prices at the turn of last year drop out of the annual comparison. Nevertheless, core inflation remains subdued, and CPI inflation is expected to stay below 1% until the second half of next year.

In November, the Committee’s central view was that if Bank Rate were to follow the gently rising path implied by the prevailing market yields then CPI inflation would exceed slightly the 2% target in two years and then rise further above it, reflecting modest excess demand. The MPC judged that the risks to this projection lay a little to the downside in the first two years, reflecting global factors.

Barry Naisbitt, Chief Economist, Santander UK, said:

"It was no surprise that the Monetary Policy Committee once again decided to hold Bank Rate at 0.50% today. With inflation still slightly negative and uncertainties about global economic prospects continuing to be a feature of economic debate, the MPC was unlikely to change the decision taken last month."

"The positive news from recent activity indicators hints that the slowing in quarterly GDP growth seen in the third quarter – to 0.5% from 0.7% in the second quarter – might reverse in the final quarter of the year.  

"However, MPC members are likely to want to see more evidence on trends in the labour market, inflation and growth, as well as the outcome of the US Federal Reserve’s decision on interest rates later this month before considering any change in policy."

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.