Interest rates: Bank of England keeps base rate at 0.5 per cent

Catherine Neilan
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Bank of England: Rates on hold. Again (Source: Getty)

The pound has risen against the dollar today, after the Bank of England confirmed the base rate would stay at 0.5 per cent.

The Old Lady of Threadneedle Street threw no surprises into the mix today, with the monetary policy committee (MPC) voting to keep the interest rate where it has been since March 2009.
The MPC also voted to keep the stock of purchased assets financed through central reserves at £375bn. The last time that changed was in July 2012, when it was increased by £50bn.
We will find out exactly how the members voted on October 22.
Although widely expected, the news has boosted sterling, which was up 0.3 per cent against the dollar at pixel time, coming on the back of last night's dovish comments from the Federal Reserve.
Here is what Berenberg's chief UK economist Rob Wood made of it:
To date the UK has seen only a gentle slowdown from elevated rates of growth, so we would caution against exaggerating the change in tone of the latest data. After-all, the UK grew 0.9 per cent quarter-on-quarter in Q2, and business surveys continue to signal strong domestic momentum.
The key question for interest rates is whether growth will pick-up again next year, and whether the labour market continues to tighten regardless of the slightly softer patch for UK growth ahead. The risks come mainly from overseas.
BNP Paribas' Dominic Bryant said: "Nothing was expected from the Bank of England today and it duly delivered. However, that does not mean there is nothing to say on the outlook for policy. The market has continued to push back the point at which the first rate hike is priced in. It now sees the move coming in early-to-mid Q3 2015.
"This is a long way off, most probably too long, for an economy that is clearly growing at an above trend pace and for which the labour market is tightening at a brisk pace."

However Investec's Philip Shaw argues that a rise could come earlier:

Overall our central case still sees the MPC raising rates next month, not least because we struggle to envisage the committee either beginning to tighten in the first few months of next year, so close to May’s general Election, or waiting as long until the summer. But given a degree of global economic uncertainty, it is quite possible that the relative probabilities shift between now and early November.

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