BoE leaves interest rates unchanged, as weakening oil prices push inflation further below goal

Source: Dukascopy Bank SA
"What we've learned through 2014 is that the risk of leaving monetary policy too loose for too long is not as big of a concern as we thought"
- Simon Wells, an economist at HSBC Holdings Plc


In line with expectations the Bank of England kept monetary policy unchanged after its first meeting in 2015, amid cooling inflation, which fell to the lowest level in 12 years, and softer growth at the end of 2014 and going into 2015. The nine-member panel also kept the size of the BoE's bond portfolio at 375 billion pounds ($567 billion). The BoE's benchmark rate has been kept at historic low since March 2009, when central banks around the world started to ease monetary policy in order to boost demand following the financial markets crash in 2008. As for the strength of the UK economy, business activity in the UK services sector, the biggest segment of the nation's economy, slowed markedly. Thus, the fourth quarter GDP data might show the economy's growth rate eased at the end of 2014, but the year is still set to be the strongest period of growth since the financial crisis. Inflation remains significantly subdued and is seen to remain below the 2% official goal until late 2017. Falling energy costs and food prices should keep price pressures contained, thus leaving households with more cash.

Two of the nine members of the BoE's Monetary Policy Committee, Ian McCafferty and Martin Weale, voted for a rate rise between August and December. The BoE will publish voting records and reasons behind January's policy decision on Jan. 21.


© Dukascopy Bank SA

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