Bank of England Left Rate Unchanged

The Bank of England policy makers said that low prices of oil and subdued growth in wages would keep a lid on the country’s inflation as they left the key rate at its record low.

In its minutes from its meeting in December, the policy committee weighed the robust growth in the domestic spending against the weak demand overseas and said eight of its nine members voted to keep the benchmark rate at 0.5% for the month.

Officials added that there would have to be a sustained firming in the domestic cost pressures to push inflation up to the target of 2%.

Oil prices have dropped again, increasing the likelihood that inflation rates would stay subdued and nominal growth in wages leveled off during the period.

Inflation was below zero for the second month during October and recent data on the economy remains mixed giving the BOE some room to maintain its policy setting for the time being, said London analysts.

While the BOE minutes said there had not be any mechanical link between the decision by BOE and other regional central banks, it is caught between the European Central Bank which is adding stimulus and the United State Federal Reserve Bank that might make its first rate increase in over 9 years next week.

The MPC announced that prospects for domestic and international activity had not changed much since the meeting in November, noting that more material news for the month had involved costs.

Last month the BOE noted that dropping prices in commodities and increased value in the pound had been damping prospect for an increase in inflation.

Since then there has been a further drop in oil, with Brent falling below $40 per barrel earlier in the week.

A measure that is trade weighed of the pound jumped nearly 6% in the last year.

Inflation could turn positive during November, said officials but core inflation continues to be subdued.