The Bank of England’s nine member Monetary Policy Committee (MPC), at its meeting yesterday (4 November), voted by a majority of 8-1 to maintain Bank Rate at 0.5%.
The vote to maintain the stock of purchased assets (quantitative easing) financed by the issuance of central bank reserves at £375 billion was unanimous.
The key to the maintenance of the Bank Rate at 0.5% is the current negative inflation figure and the MPC’s inflation target of 2%.
CPI inflation in September year-to-date stood at -0.1%, well below the 2% target and not expected to reach the target until well into 2017, hence the continuing delay in raising the Bank Rate.
The MPC’s prime objective is to return inflation to a sustainable target of 2% without an overshoot, once the current persistent disinflationary forces are out of the system.
Given the above, the MPC will be looking to ensure through monetary policy that growth is sufficient to absorb spare capacity to return inflation to target in around two years, and keeping it there in the absence of further shocks.
This is now a strong indicator of the time scale for interest rates rises above the six and a half years it has stood at 0.5%.
Article courtesy of LandlordZONE