The Bank of England was unanimous in its decision to maintain its record-low interest rates earlier this month, minutes showed on Wednesday.
The central bank’s Monetary Policy Committee (MPC) voted 9-0 to keep its key lending rate at 0.50 per cent, where it has stood since March 2009 to stimulate growth, amid Britain’s strengthening economic recovery.
The MPC was also united in keeping the bank’s quantitative easing stimulus amount at £375 billion ($636 billion, 469 billion euros), according to minutes from the June 4-5 gathering.
BoE governor Mark Carney had hinted last week that the bank could lift rates sooner than expected, prompting analysts to price in an increase by the end of the year.
That is in contrast to the European Central Bank, which launched radical and unprecedented easing measures earlier this month to bolster fragile eurozone growth and ward off the threat of deflation.
BoE policymakers added that they were “somewhat surprised” that markets had attached a “relatively low probability” to an interest rate hike before the end of 2014.
“The (British) economy was starting to return to normal. Part of that normalisation would be a rise in bank rate at some point,” the minutes read.
“The precise timing of the rise would depend on the outlook for inflation. That, in turn, would depend on the data flow, and in particular what that implied for the degree of slack, the prospect s for its absorption, and the broader outlook for wages.”
The BoE has already stated that it will not consider raising interest rates until all the spare capacity, or slack, in the economy has been absorbed.
“All members agreed that, in the absence of other inflationary pressures, it would be necessary to see more evidence of slack being absorbed before an increase in bank rate would be warranted,” the minutes added.
They also noted that there was “considerable uncertainty around the current level of slack, and a range of views on the committee.”
Last Friday, Carney had declared that the first rise in interest rates could be delivered sooner than expected.
“There’s already speculation about the exact timing of the first rate hike and the decision is becoming more balanced,” Carney had said.
“It could happen sooner than markets currently expect.”
Some experts are calling on the bank to use other tools at its disposal to help dampen soaring British house prices, particularly in London.
Meanwhile, official data showed Tuesday that Britain’s 12-month inflation rate slowed to 1.5 per cent in May, which was the lowest level for four and a half years.
The latest figures mark the sixth month in a row when the rate has been at or below the BoE’s 2.0-per cent target.
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