The Bank of England voted yesterday to keep the UK Interest rates static at 0.5%, their record low initially introduced just under 5 years ago.
The BoE Monetary Policy Committee (MPC) also decided to keep the level of the Asset Purchase Programme, known as quantitative easing, at £375 billion. This has remained at this level since it was increased by £50 billion back in July 2012.
The MPC stated that they reached their decision within the context of the guidance announced alongside the August 2013 Inflation Report. Their latest projects will appear in the forthcoming Inflation Report next week.
However Mr Carney, the governor of the Bank of England, has previously indicated that he does not want rates to increase for some time, even though his forward guidance target for unemployment of 7% has nearly been met, with the jobless figures last month being 7.1%.
Some analysts believe that the bank will use this report to signal changes in their forward guidance, either amending the targets or clarifying the guidance. Indeed some analysts have stated that they believe that more factors should be included as well as the Jobless rate. Indeed Mark Carney has previously alluded to this saying that reaching the 7% target would not trigger an automatic rise in rates.
Jonathan Loynes of Capital Economics said:
“The MPCs decision to leave policy on hold today was almost certainly the last to be taken under the unemployment-focused forward guidance adopted just six months ago.
“But whatever replaces it, interest rates are likely to remain at very low levels for a long time yet.
“One option is simply to switch the focus to a different variable, such as wages growth or nominal GDP. But the unemployment rate experience has proved the folly of relying on a single indicator to represent the overall state of the economy.”
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