The Bank of England kept its record low interest rate unchanged in a split vote and judged it premature to conclude that overseas events, especially those in China, had a huge adverse impact on the British economy.
At its meeting on September 9, the Monetary Policy Committee voted 8-1 to maintain interest rate at 0.50 percent as seen in the previous meeting held in August.
Ian McCafferty repeated his call for a quarter-point rate hike as he assessed that building domestic cost pressures would otherwise be likely to lead to inflation overshooting the 2 percent target in the medium term.
Policymakers also unanimously voted to retain quantitative easing programme at GBP 375 billion.
All members agree that, given the likely persistence of the headwinds weighing on the economy, when interest rates does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.
The actual path that the rate will follow over the next few years will depend on the economic circumstances, the bank said.
The bank lowered its estimate of the third quarter GDP growth to 0.6 percent from 0.7 percent after the release of some downside news on activity, the minutes of the meeting said.
Members observed that uncertainty about the near-term path of inflation had increased, but a pickup around the turn of the year remained likely. Some of the members saw continued upside risks to inflation relative to the target.
Although the downside risks emanating from overseas had risen, it would be premature to draw strong inferences from this month's events for the likely path of activity in the United Kingdom, the minutes said.
The MPC said it would set monetary policy in order to ensure that growth is sufficient to absorb the remaining economic slack so as to return inflation to the target within two years.
Governor Mark Carney said in a recent speech that developments in China are unlikely to influence the Bank of England rate hike decision.
The global risks, market volatility and low headline inflation readings mean that there is little prospect of an imminent rate move, ING Bank NV Economist James Knightley, said. Nonetheless, the domestic strength in activity and rising wage pressures lead to favor a February 2016 hike.
The British Chambers of Commerce raised their UK growth forecast for this year and next two years, citing increasing consumer spending and the robust services activity. In a report released early Thursday, the business lobby upped its growth projection for this year to 2.6 percent from 2.3 percent. Growth forecast for the next two years was raised to 2.7 percent from 2.6 percent.
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