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Bank of England ends 2015 with interest rates on hold

Thursday, December 10, 2015 - 22:23
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The Bank of England has kept interest rates at half a per cent, it announced Thursday in the last monetary policy decision of 2015.

[LONDON] The Bank of England has kept interest rates at half a per cent, it announced Thursday in the last monetary policy decision of 2015.

The BoE's Monetary Policy Committee (MPC) kept its key rate at 0.5 per cent, where it has stood since March 2009, it said in minutes of the latest monthly gathering.

The bank also left unchanged the level of cash stimulus, or quantitative easing, at £375 billion (S$791 billion).

The rate-setting MPC panel "voted by a majority of 8-1 to maintain bank rate at 0.5 per cent", the bank said in the minutes.

The news comes as the US Federal Reserve is poised to deliver next week its first interest rate hike in almost a decade, while eurozone monetary policy is moving in the opposite direction.

"The MPC's decision to leave interest rates on hold again today highlights how the UK is set to tread the middle path between a loosening ECB and tightening US Fed," said Capital Economics economist Scott Bowman.

"Indeed, the MPC does not appear to be in any rush to raise rates." The Federal Reserve is widely expected on December 16 to embark on the first of a long-awaited series of rate hikes, after a stream of upbeat US economic data.

The US bank's benchmark federal funds rate has been locked near zero for nearly seven years.

In contrast, the European Central Bank had last week cut its key deposit rate by 0.10 percentage points to minus 0.30 per cent, while stimulus measures fell short of market expectations.

In Britain, muted inflation and collapsing oil prices mean that there is little prospect of a hike in UK interest rates any time soon, economists say.

"Since its last policy meeting, oil prices have renewed their descent, while inflation developments generally have remained very benign," noted Lloyds economist Adam Chester.

The BoE's main task is to try and keep 12-month inflation close to a government-set target of 2.0 per cent.

The 12-month Consumer Price Index (CPI) inflation rate stood at minus 0.1 per cent last month, unchanged from September. That matched the rate in April, which was also the lowest level since March 1960.

AFP