The Bank of England voted to keep interest rates at their record low of 0.5% yesterday, with just one member voting against.
The MPC reiterated that it did not feel the volatility in China would slow down economic growth in this country, and that interest rates will still be raised in the near future. However, it lowered its estimate for the UK’s economic growth in the third quarter of this year from 0.7% down to 0.6%.
The pound jumped to a two-week high against the dollar on the news.
The MPC said in the minutes of its monthly policy meeting that “although the downside risks emanating from overseas had risen, it would be premature to draw strong inferences from this month’s events for the likely path of activity in the United Kingdom.”
The Bank of England’s governor Mark Carney commented:
“Domestic momentum is being underpinned by robust real income growth, supportive credit conditions, and elevated business and consumer confidence.
“The rate of unemployment has fallen by over two percentage points since the middle of 2013, although that decline has levelled off more recently.”
Analysts are speculating that the Federal Reserve will raise rates in the US next week for the first time since the financial crisis; if so, effects will be felt across markets globally and the Bank of England may be more inclined to follow suit.
