"A key consideration for all Committee members was the likely ability of households to accommodate the increase in debt servicing costs that would result from a rise in interest rates"
- BoE's Financial Policy Committee (FPC) report from December 3
The U.K. central bank left its monetary policy unchanged in December, even despite a flow of positive fundamental data. According to the Bank of England report the Monetary Policy Committee decided to keep the benchmark interest rate at 0.5%, while the size of its bond-buying programme held steady at 375 billion pounds. Meanwhile, the central bank's statement will be released on January 22, and it is set to provide more details on sentiment and vote composition.
During the last couple of months there have been speculations the BoE might have to refine its threshold for raising interest rates. Moreover, taking into account recent performance of the economy, some analysts believed the central bank will start increasing rate before the unemployment rate hits 7%. Almost half a year ago the bank predicted that the jobless rate will fall to the desired level not earlier than in 2016; however, a steady drop in this indicator suggests it can happen much faster. Traders now will be focusing on the February Inflation Report, where policymakers can significantly revise its outlook for both productivity rates and labour market– the key indicators which define the future shifts in the central bank's monetary policy.
Soon after the rate announcement the Pound hit 1.6491, while GBP/JPY advanced to 173.12.
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