"Although there remained a risk that emerging-market prospects might deteriorate further, there had so far been few signs of a material effect on business and consumer confidence in the advanced economies."
- MPC Meeting Minutes
The Monetary Policy Committee of the BoE voted 8-1 to keep rates at a record-low 0.5% in October, with Ian McCafferty maintaining his call for an increase. The MPC minutes also revealed a relatively soft central bank's outlook for inflation in the UK, suggesting that the rate hike would be postponed at least to the next year. The BoE said that cost pressures in Britain's labour market were rising too slowly for inflation to return to its 2% target, especially given the past strength of the Sterling. However, even though, the inflation fell back to zero in August in the UK, the policymakers are confident that robust domestic growth and the fading effect of last year's slump in oil prices would cause it to bounce back towards its projected target next year. Overall, the BoE forecasted that inflation would stay below 1% until spring 2016.
Meanwhile, The MPC made its decision amid mounting signs that British economy is starting to lose momentum after 10 consecutive quarters of solid expansion. The recent official report showed services in the UK grew at the weakest pace in more than two years, underscoring the case for keeping rates unchanged. According to the minutes, the BoE officials project the GDP to expand 0.6% in the third quarter of 2015.
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