Bank of England holds rates (again)

Robyn Hall

October 8, 2015

The one person on the MPC to vote against a hold was Ian McCafferty who continued his push for a rate rise.

Over the past three months McCafferty, a former chief economic adviser to the CBI, has been pushing for a quarter-point rate rise.

He wants the increase, according to MPC minutes, due to his fears that building domestic cost pressures were likely to outweigh the dampening influence of the appreciation of sterling, causing inflation to overshoot the BoE’s 2% target.

But the decision to hold the rate has met with mixed response.

Vicky Redwood, chief UK economist at Capital Economics, agreed with the hold.

She said: “There are good reasons for the majority of the Committee to vote to keep rates on hold until well into next year.

“Financial markets have probably gone too far in again pushing back expectations of the first rate hike until the start of 2017.

“But a rise before Q2 of next year still seems unlikely to us.”

However ING economist James Knightley believes more of the MPC could come around to McCafferty’s way of thinking over the coming months.

He said: “If financial market risk appetite continues to improve as well then we would suspect that Ian McCafferty will not be alone in voting for a rate rise at the November MPC meeting.

“We continue to look for the BoE to raise rates in the first half of 2016, well ahead of the fourth quarter move financial markets are currently pricing.”

Interest rates have been held at 0.5% for the past 6 years.

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