Bank of England holds rate at 0.5%, gives less dovish tone, pound rises

The pound rose higher after the Bank of England announced on Thursday it held its benchmark rate at 0.50 percent and was less-dovish-than-expected.

The Monetary Policy Committee did not alter its main outlook and said that: “Global developments do not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity.”

But the BoE lowered its estimate for the UK’s economic growth in the third quarter of this year from 0.7% down to 0.6%.

Policy makers said that the risks from the slowing Chinese economy had increased since August. Despite this, the MPC remained optimistic about the UK economy.

For the second month, Ian McCafferty was the only one of its Monetary Policy Committee (MPC) members to vote for an increase in rates.

It said: “Domestic momentum is being underpinned by robust real income growth, supportive credit conditions, and elevated business and consumer confidence.

“The rate of unemployment has fallen by over two percentage points since the middle of 2013, although that decline has levelled off more recently.”

British business was divided as to whether the Bank should be putting up interest rates. James Sproule, chief economist at the Institute of Directors, said: “This far into the recovery, it is worrying that interest rates are still at an extraordinary low.

“The ability to cut rates and stimulate the economy in times of instability is crucial, but with rates at their historic level of 0.5%, this is almost impossible.”

But David Kern, chief economist at the British Chambers of Commerce, said: “Although earnings are edging up gradually, labour costs are not rising at a pace that should cause concern in the near future. Inflation is also likely to remain below the 2% official target until well into 2017.

“When major international organisations such as the World Bank and the IMF have warned against putting up

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