All nine members of the Bank of England's Monetary Policy Committee voted to keep interest rates steady at 4.75 percent this month, as expected, and there seemed to be no discussion of raising borrowing costs. Minutes of the Oct. 6 and 7 meeting showed the MPC thought that there had been signs that the economy grew less strongly in the third quarter than expected but at the same time the fall in sterling and UK market interest rates combined with a rise in equity prices would tend to support activity and inflation.
"There was now a good deal of subsequent information to assess," the minutes said, adding that the forthcoming Inflation Report next month would allow the MPC to weigh all these developments together in assessing the outlook for inflation. Most analysts polled this week now think that the MPC will keep interest rates steady for the rest of the year, a dramatic turnaround from the situation a few months back when the majority had pencilled in a November hike. The minutes noted that there were also several puzzles in the current economic circumstances. "For example, between the apparent tightness of the labour market and modest pay pressures and between gradually accelerating broad money and nominal GDP, and low and stable consumer price inflation," the minutes said. It concluded "these issues added to the uncertainty to the outlook for inflation and the Committee would be able to consider them further during the November Inflation Report round." The MPC also noted that the rise in oil prices was unlikely to persist in full but warned that there were substantial risks to this outlook.
It said activity and inflation in the housing market were easing and that while the labour market was tight, it had not tightened further. Inflation had also fallen further below the 2.0 percent target, hitting just 1.1 percent in September. ///