U.K. interest rates are now likely to remain lower for even longer, with the middle of 2017 a real prospect for what would be the first rise in close to a decade.
The Bank of England’s Monetary Policy Committee (MPC), in its regular ruling on interest rates and quarterly inflation report, sounded an unexpectedly dovish note on Thursday.
The committee was split 8-1, with Ian McCafferty the only member voting to raise rates. Sterling crunched lower on the news, hitting 1.528 against the dollar after trading near 1.540. The yield on 10-year government bonds also fell, reaching 1.960 percent from yesterday’s close of 1.995 percent.
Mark Carney, the Governor of the Bank, has previously identified “the turn of the year” as the likely point at which an interest rise would “come into sharper relief”. If it looks as though this could be a whole year removed, his reputation as an “unreliable boyfriend” (as one U.K. politician famously labelled him) might be reinforced. The governor managed the market’s expectations, however, in comments made at a press conference following the announcement.