Bank votes 8-1 to leave rates unchanged at record 0.5%

The Bank’s nine-strong Monetary Policy Committee (MPC) voted by a majority of 8-1 to keep rates at 0.5 per cent, where they have stood still since the depths of the downturn in 2009. The committee voted unanimously to maintain Quantitative Easing at £375 billion, reports The Times.

Mr McCafferty, an external member, voted to lift rates by 25 basis points to 0.75 per cent, given his view that building domestic cost pressures were likely to come to outweigh the dampening influence of the appreciation of sterling, causing inflation to overshoot the 2 per cent target in the medium term.

“All members agreed that the likely persistence of the headwinds restraining economic growth following the financial crisis means that, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles,” the minutes said.

It cautioned, however, that this is an expectation and not a promise and that the path that Bank Rate will actually follow over the next few years will depend on economic circumstances.

Earlier this week Charles Goodhart, emeritus professor of banking and finance at the London School of Economics and a former member of the Bank of England’s MPC, told The Times that rates should rise by 12.5 basis points in November, pushing them up to 0.625 per cent. Most economists are expecting the first increase to be double that.

“If output growth should be better than 0.5 per cent in the UK in the third quarter, then I expect to advocate an increase in rates in November,” he said. “But I expect to be advocating an increase of rates not of 25 basis points but of 12½ basis points.”

In August, Mark Carney, the Bank’s governor, emphasised that the timing of the first increase since 2006 would come into sharper focus around the turn of the year.