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Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion





Bank of England votes 8-1 to hold rates at 0.5%


Interest rates have been left unchanged again at 0.5% by the Bank of England's rate-setters.



The nine rate-setters on the Monetary Policy Committee (MPC) voted 8-1 for no change.

Ian McCafferty, one of four external members of the MPC, was the only one to vote for a rate rise, as he has done at the previous four meetings.

It is the 81st meeting in a row at which rates have been left unchanged at that level.

The minutes of the meeting showed policymakers concentrated on the continuing subdued inflation environment.

Inflation as measured by the Consumer Prices Index (CPI) stood at -0.1% in October and the rate-setters predicted it would be slightly positive in November.

The MPC's job is to keep CPI close to the government's target of 2.0%.
The minutes predict that inflation will stay below 1% until the second half of next year.
'Global headwinds persist'

"The ongoing reluctance to tighten policy contrasts with the more hawkish stance of US policymakers," said Chris Williamson, chief economist at Markit.

"Policymakers in the US... faced with an economy growing at a similar rate to the UK, as well as a similar level of unemployment and inflation and even lower wage growth, are sending a clear message that now's the time to start the process of normalising policy."

But David Kern, chief economist at the British Chambers of Commerce pointed out that, "Even though the US may raise rates this month, the European Central Bank has eased policy even further, and global headwinds persist."

"With inflation not expected to start edging up until next year, or reach target until well into 2017, there is simply no need for the Bank to consider changing tack."

Britain's economy has grown strongly for more than two years but inflation remains below zero and the Bank has kept rates at the level to which they were cut during the worst of the financial crisis nearly seven years ago.

Governor Mark Carney and other Monetary Policy Committee members said the "material news" in the month since they previously met was that the price of oil had "fallen markedly again", which raised the likelihood of inflation staying subdued.






None of the nine current members of the MPC has been on the committee when rates were raised or cut. The longest-serving current member is Martin Weale, who joined in August 2010, more than a year after the last change in rates.

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Low interest rates stimulate the property industry sector by encouraging home-buyers activity and by making it less expensive for individuals and businesses to borrow money to invest in all types of real estate. Mortgage rates, which represent the interest a home buyer must pay when taking out a loan to purchase real estate, are tied to federal interest rates. When these rates are low, a homeowner pays much less over the duration of his mortgage (usually 15 or 30 years) for the same priced home.


Cheaper mortgages stimulate demand, creating an incentive for more people to take out mortgages and buy homes. Heavy purchasing activity usually precipitates appreciation in real estate prices; this was evident during the housing boom of the late nineties to mid noughties. Real estate investment trusts (REITS), which are companies that make money by investing in real estate directly, see their portfolios appreciate rapidly during periods of low interest rates.

Interest charged on commercial and industrial real estate loans is also tied to central bank [bank of england  rate]. 

When rates are low, more companies look to add to their real estate portfolios, purchasing office buildings and production centers.

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Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion

10 December 2015

Monetary policy summary

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