Bank of England is Expected to Keep Interest Rates Low Until 2017

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Bank of England
Bank Of England. (City of London)

The Bank of England states that the outcome for growth has weakened in recent months. The Monetary Policy Committee released its interest rate and quarterly inflation report, which was noted as being dovish on Thursday.

During the vote, only one member voted to raise rates in the United Kingdom, and that one member would be Ian McCafferty. The eight-to-one vote indicates that the UK will not be raising rates anytime in the near future. The sterling dropped on the news, down to 1.528 against the dollar. Ten-year government bonds also saw a reduction, closing at 1.995%, down from 1.960% on Wednesday.

The BoE’s governor, Mark Carney, states that the guidance is merely an expectation and not a definite plan for the bank. It is expected that rates in the country will remain low until the middle of 2017, according to current economic outlooks.

Major factors in the decision include oil and commodity prices, which have been struggling in recent months; slow global growth; and short-term inflation expectations remaining low. A major issue is that sterling energy prices are forecasted to be 15% higher in February than they are today. Inflation is also expected to stay below 1% until at least mid-2016.

Growth forecasts in the UK have also been lowered from 2.8% to 2.7% in 2015, with a 0.1% reduction for 2016 and projected growth of 2.5%.

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