The Bank of England kept its key rates unchanged at a record low again as widely expected, in a split vote at the final monetary policy meeting of the year.
The Monetary Policy Committee, headed by Mark Carney, voted 8-1 to hold the interest rate at 0.50 percent on Thursday. The rate has been at the current record low level since early 2009.
The MPC voted unanimously to maintain quantitative easing at GBP 375 billion.
Ian McCafferty has been the sole dissenter since August, seeking a 25 basis points rate hike, suggesting that policymakers are in no hurry to tighten monetary policy.
McCafferty suggested that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term, the bank said in a statement.
All members agreed that when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.
Scott Bowman, a UK economist at Capital Economics, said the market has gone too far in pushing back the first rate hike to early 2017. He said the recovery will regain pace after a temporary slowdown in the third quarter and inflation will bounce back next year as the peak impact of energy price falls fade.
The probability attached to a tightening in the U.S. monetary policy in December had risen further. However, the BoE said there was no "mechanical" link between UK policy and those of other central banks.
The central bank expects inflation to remain below 1 percent until the second half of next year. Despite lower unemployment, nominal pay growth appears to have flattened off recently, the bank noted.
James Knightley at ING Bank NV sees a good chance of inflation surprising on the upside in coming quarters. The economist said he is comfortable with the second quarter 2016 rate hike view.
Further, the bank noted that an increase in projected borrowing as announced by the Chancellor in Autumn Statement will boost GDP by around 0.2 percent in 2016.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.