The Bank of England surprised the markets today by deciding 8-1 not to raise interest rates. Analysts had expected a rate hike following pay rises and increased growth.
Mark Carney stressed that the rate increases would be “gradual and limited,” emphasising that the “path is more important than the likely timing of the first increase”.
Just one member of the Bank of England’s interest rate-setting committee voted to raise interest rates from their record low of 0.5%, shocking City expectations that “Super Thursday” might bring an end to the era of ultra-low borrowing costs which haven’t changed in six years.
Samuel Tombs, senior UK Economist at Capital Economics forecast some time before any changes to the status quo were made: “Thursday’s releases support our view that a majority will vote to keep interest rates on hold until the second quarter of next year.”
In the Inflation Report, the Bank suggested that the rapid growth in jobs – one George Osborne’s most trumpeted achievements during the last 6 months – appears to be withering, leaving the labour market – and thus anyone with debt, on credit cards, loans or overdrafts, in an difficult situation when rates do rise.