UK interest rate left unchanged at 0.25%

December 15, 2016 12:31 pm Published by

UK interest rate left unchanged at 0.25%

  • 15 December 2016
  • From the section Business

The Bank of England in LondonImage copyright
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The Bank of England has voted unanimously to keep the UK’s main interest rate at a record low of 0.25%.

It added that the next rate move could be in either direction. The last move came in August, when it was cut following the vote to leave the EU.

The news has sent the pound lower, falling below $1.25.

It comes a day after the US Federal Reserve raised its key interest rate by 0.25% to 0.75%, citing stronger economic growth and rising employment.

The Bank also voted to leave its bond buying programme, created to stimulate the UK economy after the referendum, unchanged.

That means it will continue to buy and hold £435bn of UK government bonds and £10bn of corporate debt.

Fragile

The Bank said it now predicted a slight improvement in the inflation forecast after seeing the value of the pound and oil price rise since its last meeting.

“All else equal, this would result in a slightly lower path for inflation than envisaged in the November Inflation Report, though it is still likely to overshoot the target later in 2017 and through 2018,” the Bank’s statement said.

It added that “the global outlook has become more fragile, with risks in China, the euro area and some emerging markets, and an increase in policy uncertainty.”

Former monetary policy committee member Andrew Sentance said: “The Committee is planning to look through the rise in inflation expected next year and remains concerned about the prospect of slower growth following the Brexit Referendum result”.

He added that the Bank of England was unlikely to follow the US in raising rates soon.

“However the picture could change next year if we get further US rate rises and the UK economy remains resilient in the face of Brexit uncertainty.”

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This post was written by FSB News