The Bank of England’s Monetary Policy Committee has admitted it is “uncertain” what path base rate would follow over the next few years.
The minutes from this month’s rate-setting meeting reveal all nine committee members voted to keep base rate at 0.5 per cent and all agreed it is “more likely than not” that base rate would rise in the next three years. Two members of the MPC said their decision to hold rates was “finely balanced”.
However, the committee said that while it still expects rates to rise gradually – when they eventually increase – this is merely guidance and economic factors will determine the pace of any increases.
The minutes say: “The actual path Bank rate would follow over the next few years was uncertain and would depend on economic circumstances.
“The committee’s guidance on the likely pace and extent of interest rate rises was an expectation, not a promise.”
Capital Economics senior UK economist Samuel Tombs says: “With CPI inflation unlikely to approach the 2 per cent target until well into 2016 and productivity primed for a recovery, we think there will be little pressure on the MPC to raise rates this year.”
All nine members voted to keep the Bank’s programme of quantitative easing at £375bn.