The decision has been made to keep interest rates set at a record low 0.5%, despite expectations that they would rise.
Despite many predicting that rising interest rates would be announced today, just one member of the Monetary Policy Committee voted for an increase on “Super Thursday”. This comes after the Governor of the Bank of England, Mark Carney, stated that rates could rise as high as 2% within the next 3 years. While the vote resulted in an 8-1 split, this is the first time the final decision has not been unanimous this year. So although the MPC have been largely cautious about rates increases, there are signs that it isn’t too far away. Mark Carney stands by his prediction that interest rates will rise around the turn of the year.
Why So Cautious?
Some believe that the strength of the pound has delayed the increase. Mattias Bruer, an economist at SEB said, “According to the [Bank of England] minutes there is a risk that its appreciation could depress inflation for a 'persistent period’”. Economic growth is stronger than was predicted, aided by cheap energy costs and rising wages. Other factors, such as a slowdown in the labour market have prompted the MPC to keep restrained. The Guardian summarises Super Thursday here.