Bank of England Leave Rates At 0.5%

The Bank of England (BoE) has just completed their scheduled Monetary Policy Committee (MPC) meeting.

There were no surprises out of this meeting, which sees the country’s base interest rate remain once again at 0.5% and the Asset Purchase Facility held steady at £375Bn.

There was a very slim chance of a rate hike out of this morning’s MPC deliberations as the previous meeting in August saw two of the nine member committee break ranks and vote for monetary tightening.

The minutes of today’s meeting will provide insight into whether the two hawks are joined by any of their colleagues.

UK growth, which is performing above target, is not the major concern of the monetary policy makers, instead inflation is driving their deliberations. Last month’s minutes stated that there was insufficient evidence of inflationary pressure to warrant a premature interest rate increase. This is backed up by recent easing of the rate of general price growth, inflation stopped short of the Bank’s 2% target when it hit 1.9% earlier in the summer, since then it has in fact fallen back to a more comfortable 1.6% and this provides breathing space for the policy makers to hold on to their loose monetary stance.

It still remains unclear as to when the much cited interest rate increase will be implemented by the MPC. The tempering of inflation could well push such an announcement into the first quarter of 2015 or beyond. On the Central Bank’s watch list however is the runaway growth in house prices, the MPC has kicked this over to it’s sister grouping, the Financial Policy Committee (FPC), to deal with. Macroprudential measures so far implemented by the FPC are beginning to show some effect however consensus is building, lead by recent comments from the International Monetary Fund, that the BoE will need to take out the bigger guns in the form of general rate tightening in order to cool house price growth.