- Bank of England
Two policy makers of the rate-setting Monetary Policy Committee, who insisted on the need to raise interest rates in the near term, changed their mind and joined those, who advocated for keeping rates unchanged, which raises speculation the Bank of England will refrain from raising interest rates until next year. Thus, nine-member panel unanimously voted to maintain the BoE's interest rate at 0.5% and the size of its asset portfolio at 375 billion pounds. Martin Weale and Ian McCafferty, who repeatedly voted for a rate increase each month between August and December, dropped their campaign for higher borrowing costs. A precipitous fall in oil prices caused the UK consumer prices to drop to the lowest level in 14 years of 0.5%, far below the BoE's inflation goal of 2%. The unexpected decline in inflation put deflation threat on the horizon. A separate data showed the unemployment rate unexpectedly dropped to 5.8%, with the number of people seeking jobless benefit declining for the 26th straight month. The number of people claiming unemployment benefit fell by 29,700 people, slightly above last month's figure. This resulted in a claimant count rate of 2.6%, in line with market expectations. The unemployment rate in Britain has been falling sharply over the last two years, from 8.4% in January 2012 down to 6.0% in the quarter to October last year. In its November Inflation Report forecasts, the Bank of England revised its outlook for the jobless rate down to 5.7% in the final quarter of 2014.
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