Business

Bank of England votes 8-1 to hold rates at 0.5%

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UK interest rates have been left unchanged again at 0.5% by the Bank of England's rate-setters.

The nine rate-setters on the Monetary Policy Committee (MPC) voted 8-1 for no change, predicting that inflation would stay below 1% until the second half of next year.

Ian McCafferty, one of four external members of the MPC, was the only one to vote for a rate rise.

He also voted for a quarter-point rise at each of the previous four meetings.

It is the 81st meeting in a row at which rates have been left unchanged at 0.5%.

The minutes of the meeting showed policymakers concentrated on the continuing subdued inflation environment.

Inflation as measured by the Consumer Prices Index (CPI) stood at -0.1% in October and the rate-setters predicted it would be slightly positive in November.

The MPC's job is to keep CPI close to the government's target of 2.0%.

Last week, the European Central Bank took steps to boost the eurozone economy, cutting its overnight deposit rate and extending its €60bn stimulus programme by six months.

But the Federal Reserve in the US is widely expected to raise rates at its policy meeting next week.

'Global headwinds persist'

"The ongoing reluctance to tighten policy contrasts with the more hawkish stance of US policymakers," said Chris Williamson, chief economist at Markit.

"Policymakers in the US... faced with an economy growing at a similar rate to the UK, as well as a similar level of unemployment and inflation and even lower wage growth, are sending a clear message that now's the time to start the process of normalising policy."

But David Kern, chief economist at the British Chambers of Commerce, pointed out: "Even though the US may raise rates this month, the European Central Bank has eased policy even further, and global headwinds persist."

"With inflation not expected to start edging up until next year, or reach target until well into 2017, there is simply no need for the Bank to consider changing tack."

None of the nine current members of the MPC has been on the committee when rates were raised or cut. The longest-serving current member is Martin Weale, who joined in August 2010, more than a year after the last change in rates.

The last member who had experience of changing rates was Paul Fisher, who left in July last year.

The pound fell slightly against the dollar following the announcement and is now down by about three quarters of a cent.

It also fell slightly against the euro, but remains up half a cent on the day.

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