BoE keeps interest rates unchanged, as expected

The Bank of England kept all its main policy settings unchanged after the meeting ended on 6 October, as expected.

Nonetheless, the decision taken by the Monetary Policy Committee's Ian McCafferty to hold out in favour of a rise even in the face of last Friday’s US jobs report may have come as a bit of a surprise to some observers.

The Monetary Policy Committee decided to keep Bank Rate steady at 0.5% by a majority of 8 to 1.

The decision to keep the size of the asset purchase facility at £375bn was unanimous.

In the summary of its policy decision, issued on 8 October, the MPC said that around three quarters of the difference between the current rate of consumer price inflation and the Bank of England’s 2% target could be explained by “the unusually low contributions from energy, food and other imported goods prices”.

Similarly, rate-setters at the Bank of England said "some slowdown" in the pace of the expansion and employment growth had been expected as a natural consequence of the economy approaching a balance between its supply capacity and strengthening demand.

"The path that Bank Rate will actually follow over the next few years will depend on economic circumstances."

As of 12:27BST cable was moving slightly lower, slipping 0.07% to 1.5309 while the Footsie was gaining 0.37% to 6,360.72.

Bank Rate on hold until second half of 2016

Commenting on the content of today’s minutes, Martin Beck, senior economic advisor to the EY ITEM Club, said: “Notably, in the MPC’s view, problems in emerging markets had so far shown few signs of hitting business and consumer confidence in the UK. […] So the debate among the Committee continues to be whether UK inflation will be affected more by robust domestic demand or weak activity overseas.

“November, when the Bank presents a new forecast, will be a more opportune month to announce any fundamental change of view in the outlook for inflation or growth. In our view, disinflationary forces will prove to be more intense than the MPC expects, with a rate rise unlikely to happen until the latter part of 2016.”