The Bank of England’s (BoE) Monetary Policy Committee (MPC) today voted eight to one on favour of keeping interest rates at their record low of 0.5%.
But the poll also assessed that two, and possibly three, of the nine members of the Monetary Policy Committee probably voted for a rate hike after wages started to rise more quickly recently and the crisis in Greece eased.
The decision came on what has been dubbed “Super Thursday”, when the bank for the first time releases together the results of the rate-setting meeting, minutes of the discussions and the quarterly inflation forecast.
The Bank of England said it expected inflation to be back to its 2 percent target in two years’ time.
Inflation is projected to rise from current lows “around the turn of the year“, as past falls in energy prices drop out of the annual comparison, the report said.
The Bank forecasts the Consumer Price Index (CPI) measure of inflation at zero for July and August before edging up slightly in September, though allows for a margin of error slightly above or below its predictions. And an intention to do so seems to be borne out, both in the inflation report and the minutes to the policy meeting, meaning the latest movements in oil prices and the currency shouldn’t be a significant impediment to lifting rates.
Bank of England Governor, Mark Carney, said during the press conference Q&A that while none of the committee pre-commits to any future rate decision, “What we do see is an economy where the slack is being used up”.
Interest rates have stood at 0.5% for 77 consecutive months.
Samuel Tombs, senior UK economist at Capital Economics. Investors now expect it to stay there until next February or March, a prediction which was essentially endorsed by the Bank, whose job it is to keep inflation as close as possible to 2%.