Economic turbulence in China and developing markets prompted a “wait and see” approach among the UK’s nine-strong committee of rate-setters, according to minutes of their three-day meeting released today.
The monetary policy committee (MPC) said it was too early to judge what impact a slowdown in China and emerging markets might have on the UK economy, but cautioned that it was not immune.
“A key lesson from the 2008 financial crisis had been that financial and uncertainty effects might have a potent adverse effect on aggregate demand,” the minutes of the meeting, which concluded yesterday, said.
The MPC also noted that “some UK banks had sizeable exposures to emerging markets.”
However, the Bank still expects inflation to climb back up to one per cent by the early months of 2016, as the dampening effect from oil and commodity price falls wear off.
Ian McCafferty was the solitary hawk, viewing domestic inflationary pressures as still sufficiently high to justify a hike, as the MPC repeated their eight to one vote to hold rates.
The decision to hold rates at their record low of 0.5 per cent was made yesterday, but only made public today with the publication of the minutes as part of the Bank’s efforts to improve its communication. The base rate has been at 0.5 per cent since March 2009.