The Bank of England has voted 8-1 to keep interest rates on hold at 0.5%.

For the second month, Ian McCafferty was the only one of its Monetary Policy Committee (MPC) members to vote for an increase.

Policy makers also said that the risks from the slowing Chinese economy had increased since August.

In its summary, the committee said: “Developments since then have increased the risks to prospects in China, as well as to other emerging economies.”

It added: “Global developments do not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity.”

Cost pressures

However the MPC remained optimistic about the UK economy, despite poor figures on the UK’s exports and manufacturing on Wednesday.

It said: “Domestic momentum is being underpinned by robust real income growth, supportive credit conditions, and elevated business and consumer confidence.

“The rate of unemployment has fallen by over two percentage points since the middle of 2013, although that decline has levelled off more recently.”

The bank said Mr McCafferty alone of the nine-strong MPC had wanted to increase the main interest rate by 0.25%.

It said he believed that building domestic cost pressures would otherwise be likely to lead to inflation overshooting the target in the medium term.

The bank said that interest rate rises, when they do come, will be slow.

“All members agree that, given the likely persistence of the headwinds weighing on the economy, 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 statement said.

“This guidance is an expectation, not a promise.”

 

Source: BBC News

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