Sixth year after historic UK rate cut, what next?

The Bank of England (BoE) left monetary policy steady Thursday, barely causing a stir in markets — a stark contrast to six years ago when it cut rates to a record low amid a global financial crisis.

The central bank kept the U.K.’s benchmark interest rate at a record low of 0.5 percent and the total size of its bond portfolio at £375 billion ($571 billion).

Much has changed since the BoE’s historic rate cut six years ago, to the day. Here are some of the reasons why economists don’t expect another year to pass with no monetary policy change.

Brighter outlook:

The BoE expects the economy will grow by 2.9 percent this year — its fastest growth in nearly a decade – thanks in part to a slide in oil prices that gives back money to consumers and businesses.

“A lot has changed in the British economy since the firestorm unleashed in 2008. The U.K. has slowly but surely been consigning the after effects of that financial crisis to history,” Berenberg Chief U.K. Economist Robert Wood said in a note.

“Absent oil’s price fall a rate hike this year would probably have been odds on. As it is, we look for the first hike in February 2016.”

The U.K. economy expanded 2.6 percent in 2014 – the fastest growth in seven years.

CNBC

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Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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