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Thursday 18th September 2014
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Bank Holds Its Nerve On Rate Rise Prospect

Thursday, 4th September 2014 11:52

The Bank of England has held off on an interest rate rise at its monthly meeting amid divided opinions on the timing of an increase in August.

The Bank confirmed at midday there would be no bank rate rise in September from the 0.5% record low first introduced in March 2009.

It emerged last month that external members of the nine-strong Monetary Policy Committee (MPC), Martin Weale and Ian McCafferty, voted to raise the base rate from 0.5% to 0.75% - the first split vote since Mark Carney became Bank governor.

The pair saw economic circumstances as sufficient to justify an immediate rise in the rate, which directly impacts home loan and saving interest rates.

They noted that the continuing rapid fall in unemployment, alongside survey evidence of tightening in the labour market, created a prospect that wage growth would pick up.

However, their voting took place before inflation figures showed a drop in the Consumer Prices Index to 1.6% - well below the Bank's 2% target.

Official pay growth figures, also released after August's MPC vote, showed the average weekly earnings figure contracted by 0.2% in June.

Only when the minutes of September's MPC meeting are released later this month will it be clear if the data had any impact on the split within the committee.

The majority on the MPC fear that raising rates too soon could hamper growth, with sectors such as manufacturing and construction still below pre-recession level.

A rate rise would also put pressure on household finances, with a 0.25% hike likely to translate to an annual increase of £250 on a typical mortgage.

Economists and market analysts do not expect a rate rise before November at the earliest - more likely in February 2015.