10th September 2015
The Bank of England’s Monetary Policy Committee (MPC) has voted 8-1 to keep interest rates at their historic low of 0.5% for at least another month.
MPC member Ian McCafferty once again put his head above the parapet by being the sole voice calling for a hike, of 0.25%. The MPC voted unanimously to maintain its bond buying programme at £375bn.
Interest rates have now been stuck at their current level for more than six years after the Bank slashed them back during the financial crisis in a bid to prop up the economy.
Given the market and economic turbulence of recent months, chiefly on the back of a slowing Chinese economy, the MPC said it was concerned about implementing an increase.
In a statement, it said: “The Committee noted in the August Report that the risks to the growth outlook were skewed moderately to the downside, in part reflecting risks to activity in the euro area and China. Developments since then have increased the risks to prospects in China, as well as to other emerging economies. This led to markedly higher volatility in commodity prices and global financial markets.
“While these developments have the potential to add to the global headwinds to UK growth and inflation, they must be weighed against the prospects for a continued healthy domestic expansion.”
Ben Brettell, senior economist at Hargreaves Lansdown said there “were no surprises from the Bank of England today”.
He added: “If the Bank only considered domestic factors, the decision might well have been more finely balanced. However, it is global conditions which are concerning policymakers and tipping the scales in favour of inaction. The concerns are numerous.
“A slowing Chinese economy and devaluation of the yuan, concerns over the health of other major emerging markets and the resulting volatility in commodity prices could all create headwinds for the UK economy. Today’s minutes noted that global developments weren’t yet sufficient for the Bank to change its outlook, but downside risks ‘merited close monitoring’ in the coming months.”