The Bank of England’s Monetary Policy Committee has once again voted to keep base rate at 0.5 per cent.
Minutes from yesterday’s meeting show just one member, Ian McCafferty, voted for a rise. He believed rates should rise 0.5 per cent because “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”.
The minutes reiterate that when rates rise they will do so slowly, due to the “likely persistence of headwinds weighing on the economy”.
The committee voted unanimously to maintain its quantitative easing programme at £375bn.
Russ Mould, investment director at AJ Bell, says the decision is “understandable”.
“The Bank of England’s decision to leave interest rates unchanged at their record low of 0.5 per cent for the 82nd straight month is understandable, given patchy UK economic data, wobbly stock markets, sliding commodity prices, Chinese currency shenanigans and gathering fears of worldwide deflationary shock,” he says.
“In addition, sterling’s slide to five-year lows against the dollar at $1.44 and an 18-month trough against the euro at around €1.32 buys governor Mark Carney some time, as this effectively eases policy for him by giving exporters a boost.
Mould says rates are likely to persist at their record low for the rest of this year.
“The voting patterns of the Monetary Policy Committee also give little hint that a move to a more hawkish policy is coming. For the sixth month in a row the vote was 8-1 for no change in interest rates and it would not be the biggest surprise in the world if the base rate was left unchanged throughout 2016.”