The Bank of England stuck to its plan to nurse the economy back to full health with record low interest rates on Thursday, despite strong growth and fast-rising house prices. As widely expected, the Bank's Monetary Policy Committee left its benchmark interest rate at 0.5%, its level since the worst of the financial crisis more than five years ago. The MPC made no statement. Details of how its nine members voted will be released in just under two weeks' time.
Martin Weale, the MPC member most likely to break ranks and cast a first vote for a rate hike, said last week that borrowing costs should go up sooner rather than later although it was not yet time to start easing the economy off the BoE's stimulus. Last month BoE Governor Mark Carney said Britain's economy was only edging towards a first interest rate hike, even as growth is expected to top 3% this year.
The BoE thinks there are still enough people out of work or seeking more work to allow the recovery to continue without pushing up inflation. Forecasts from the Bank published in May showed that gradual interest rate rises starting in about a year's time would be consistent with its 2% inflation target. The Bank also says it will not raise interest rates as its first line of defence against risks from Britain's housing market which is booming in many areas of the country. Instead, it will turn initially to further controls on mortgage lending, possibly as soon as this month.
The BoE's Financial Policy Committee meets on June 17 and its decision is due to be announced on June 26. Data from mortgage lender Halifax on Thursday showed house prices rose by nearly 4% in May alone although economists said the number, while reflecting the strength in the market, could be a blip. The BoE also said on Thursday it was keeping unchanged its 375 billion-pound ($628 billion) stockpile of government bonds which it built up over recent years in an attempt to get the economy moving again.
(Writing by William Schomberg; Editing by Hugh Lawson)