BoE votes unanimously to keep interest rates unchanged

The Bank of England voted unanimously to keep interest rates unchanged on Thursday amid low inflation and weak global growth.

The BoE’s Monetary Policy Committee decided to maintain its key rate at 0.50% and its asset purchase programme at £375bn, as anticipated by analysts.

However, many analysts had expected an 8-1 vote, with MPC member Ian McCafferty voting in favour of a rate hike.

In the Inflation Report released alongside the monetary policy announcement and the meeting minutes, the BoE cut UK economic growth forecasts. The BoE now expects gross domestic product to rise by 2.2% this year, down from 2.5% in its previous estimates. The central bank also slashed its growth forecasts for 2017 to 2.3%, down from an earlier estimate of 2.6%.

The Inflation Report warned that global growth had slowed further over the past three months, dragged by flagging emerging economies, particularly the slowdown in China.

The report also highlighted that wage growth has been weaker than anticipated and labour costs were expected to rise a "little less quickly than thought at the time of the November Inflation Report".

The BoE noted that 12-month CPI inflation stood at 0.2% in December, almost 2 percentage points below the inflation target of 2% as oil prices were more than a third lower, in sterling terms, than a year earlier.

The MPC said the recent commodity price falls meant that CPI inflation is likely to remain below 1% until the end of the year.

“It’s now the 83rd month in a row that UK policymakers have resisted the urge to rise, although with US rates already up its possibly only a matter of time before the Bank of England follows suit," said Dennis de Jong, managing director at UFX.com.

“For now, however, yet more torment continues for savers and investors, while borrowers across the UK will be licking their lips at the prospect of further low interest rates.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said that an interest rate rise now looks "firmly in the long grass" following the cut to GDP forecasts and as inflation continues to be hit by falling oil prices. Markets are now pricing in a rate rise in the middle of 2017, Khalaf said.

"Our investors will know we have long been of the opinion that interest rates are going nowhere for the foreseeable future, and as we see no evidence to relieve us of that view as we look forward into the coming year."

Fidelity International's investment director for personal investing, Maike Currie, agreed that a rate rise seemed a long way off after the BoE pointed to worries about emerging markets, a slowdown in the US and falling oil prices.

“Despite these noble intentions, Super Thursday is now much more aptly referred to as Superfluous Thursday, because regardless of the format of the delivery, it is clear that UK interest rates will not be rising any time soon. In fact, many now believe that UK rates will stay at their 300-year low for the whole of 2016 – some even speculate that the Bank of England could follow Japan’s lead in joining the negative interest rate club," Currie said.