Bank of England Indicates Interest Rate Hikes Still Far Off
Bank of England appears to be still far from raising interest rates, after its policymakers showed more unanimity than expected Thursday in keeping the key borrowing rate at a record low.Amid concerns over low inflation and slowing growth in Asia, the Bank of England’s policymakers voted 8-1 to leave the rate at 0.5 percent for a 78th consecutive month and opted not to pump more money into the economy.
The near-unanimity surprised investors and analysts, who had expected two or even three policymakers to seek a rate increase. The pound fell sharply on the news, to $1.5482 from $1.5630 earlier.
The prospect of a longer period of low interest rates tends to weaken a currency.Governor Mark Carney said that the Bank of England is “drawing closer” to a rate increase as Britain’s economic growth remains among the fastest among advanced economies.
But when remains an open question.”The exact timing of the first move cannot be predicted in advance; it will be the product of economic developments and prospects,” he said. “In short, it will be data dependent.”But Thursday’s decision suggests that the Monetary Policy Committee believes that moment may be far off — particularly given the low inflation numbers. Carney said inflation’s brief dip below zero was “the most striking development in the U.K. in the past year.”