Bank of England leaves interest rates unchanged at record low

In a widely expected move, the Bank of England (BOE) has left interest rates unchanged at a record low for the 70th month running.

Since there was no statement, many will now turn to the minutes of the Monetary Policy Committee (MPC) meeting on December 17th to fully understand the decision.

At the previous meeting of the MPC, two members of the committee voted to raise rates due to worries over the building of inflationary pressures.

GDP still expected to grow slowly

Although earlier predictions pointed at an interest rate hike this year, new data may have stayed the Bank’s hand: analysts now predict no rate rise until late 2015. In addition, the Bank was also likely worried by inflation forecast at below one per cent in coming months and depressed house price inflation.

In a report accompanying the Autumn Statement, the Office for Budget Responsibility (OBR) said GDP increased more strongly this year than forecast, but they “still expect the quarterly pace of growth to slow into next year – and somewhat more so than in March – as consumer spending moves more into line with income growth.”

Britain faces further fiscal austerity

The UK chancellor, George Osborne, detailed austerity plans when he delivered the Autumn Statement on 3 December.

The plans will bring public spending to its lowest level in 80 years when compared to GDP, said the OBR, and warned that the implied cuts in public spending would pose a “significant challenge if they were confirmed as a firm policy”.