LONDON, Oct. 9, 2015 /PRNewswire/ -- Thursday's Monetary Policy Committee meeting minutes met market expectations, confirming that the Bank of England is to hold interest rates at a record low of 0.5%.
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The MPC voted eight to one in favour of keeping interest rates at their current level - maintaining the six year status quo.
"Inflation continues to be an underlying concern with MPC members, with current readings coming in well below the Bank of England's 2% target. The relative strength of the pound sterling is a contributing factor here, as it has impacted on slowing cost pressures in the UK workforce," explains Jarratt Davis, Head of FX at Smile Global Management.
"This continues to drag on inflation, and the signals from the Bank of England are that it is no rush to hike interest rates until it absolutely has to. The question now for traders is whether low inflation will further delay an anticipated increase rate in early 2016.
"Despite recent data from the US suggesting a slowdown in job creation, we expect to see the Bank of England raise its interests rates after the Federal Reserve does the same - most likely in quarter one or quarter two of 2016.
"Some analysts have suggested that a hike could now happen towards the end of 2016, but we believe that is unlikely at this stage considering the overall health of the US labour market."
The Bank of England also commented on the potential impact of the global forces - particularly the performance of emerging markets. In spite of global nervousness surrounding falling commodity prices, policymakers suggested that there was little proof that was hurting developed economies at the present time.
In addition, adjustments to official UK data showed that the domestic economy was slowing slightly.
"Everything ultimately depends on when the Federal Reserve decided to raise interest rates. Some have bets hedged before the end of 2015, but the likely scenario is early 2016. Traders should closely monitor inflation data from the US, while tracking the ongoing performance of the Chinese economy. All things considered, the Bank of England will be the first central bank to follow suite once that happens."
For further market commentary from Jarratt Davis, please email [email protected].
SOURCE JarrattDavis.com
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