Bank of England likely to hold record low interest rate until 2015

The Bank of England (BOE), British central bank, maintained the bank rate at its historical low of 0.5 percent Thursday, with economists commenting that bank rates are likely to hold until 2015 at least. There was no change in the BOE's monetary policy, with rates staying at 0.5 percent where they have been since March 2009. The continuation with the rate was universally expected, with BOE officials embarking over the last month on a series of public speeches and interviews bedding in the new "fuzzier" forward guidance policy that sets a bank rate rise on conditions in the economy rather than a specific time. David Tinsley, British economist with BNP Paribas in London, told Xinhua Thursday afternoon, "It was very predictable decision. The BOE Monetary Policy Committee (MPC) has got things fairly easy at the moment with UK growth solid and inflation falling. Until something shifts in that picture you would not expect them to be doing very much." Tinsley added, "All the time inflation looks so benign. The BOE can hold off doing anything, even with fast growth. In some point in the future inflationary pressures will pick up as unemployment falls and wages rise. That will be the time for tightening but I doubt it will be this year." House prices are causing some concern, but Tinsley said that he expected the BOE to tackle any threat of a housing bubble with macro-prudential measures and it was unlikely to raise rates because of a housing market risks. James Knightley, chief economist with ING Bank, said that the robust recovery was fuelling market expectations of an earlier rate rise than the BOE was indicating. Knightley said, "The strength of the growth story coupled with the robustness of the labor market means that the BOE is likely fighting a losing battle in convincing financial markets that rate hikes are a distant prospect." Knightley added, "There are already tentative signs of wage growth picking up and we suspect that this process will gain momentum as the pool of available labor, and the general amount of "slack" continues to shrink." Knightley forecast the first rate hike for February next year.