Nov 5 The Bank of England gave no sign that it was in any more of a hurry to raise interest rates on Thursday, predicting near-zero inflation would pick up only slowly even if borrowing costs stay on hold all of next year.
The British central bank’s tone contrasts with that of the U.S. Federal Reserve, whose chair, Janet Yellen, said on Wednesday that a U.S. rate rise was a prospect for December.
Only one BoE policymaker, Ian McCafferty, voted to raise interest rates this month, while the other eight members of the Monetary Policy Committee opted to keep them at a record-low 0.5 percent, where they have been since March 2009.
The BoE trimmed its forecast for economic growth for this year and 2016 and warned emerging markets could get stuck in a rut of slower growth.
“The outlook for global growth has weakened since the August Inflation Report,” the BoE said in its quarterly forecast update. “There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.”
The central bank also announced it would continue to reinvest the proceeds of bonds maturing from the 375 billion pounds of quantitative easing assets that it bought to spur growth until it had raised interest rates to around 2 percent.
The BoE message on inflation may surprise investors, who in recent days moved to price in a rate rise at the end of next year. That was sooner than bets held until late last month that a first move would not come until the first half of 2017.
It was this latter expectation that the BoE used as a working assumption in its forecast update, which predicts that inflation — currently below zero — would nudge above 2 percent in two years’ time on a so-called ‘modal’ projection basis.