The U.K Monetary Policy Committee (MPC) voted to keep the current rate at 0.5 percent. According to the minutes 8 of the members voted in support of the current rate while 1 member voted for rate hike. The official bank rate remains 0.5 percent.
Asset purchase Facility remain the same at 375 B, the apex bank will continue to buy assets to the tune of 375 B in order to support the economy and create more jobs. The bank also cut its short-term outlook on inflation and became more cautious about the position of the labour market.
The vote shows that the economy is not self-sustainable enough to increase rate, if the majority of the committee that have access to vital economic data chose to maintain current rate and at the same time continue asset buying at the same rate, it is wise to think rate hike might not happen till later in the year or first quarter of 2016 when the economy might have picked up pace.
U.K industrial production data that came out early today shows a decrease from 0.3 percent to -0.4 percent, falling below 0.1 percent forecasted by economists. The strong pound is hurting export, hence, the reduction in industrial production for last month.
According to John Longworth, the director general of the British Chambers of Commerce, “it would have been imprudent to push through a rate rise at this moment when our economic recovery remains in need of care and encouragement”.
He further said rate hike will eventually happen and when they do, it should be gradual process but until then, the Bank of England is right to keep rates at current levels.
This is the first time the apex bank has released the monthly rate decision and at the same time the minutes of the bank’s Monetary Policy Committee meeting.
The U.K pound fell 0.6 percent against the U.S dollar to $1.54660 and the euro gained 0.7 percent reaching 0.70443, the highest in almost a week.