Bank holds rates at 0.5% amid weaker UK outlook

Members of the Bank’s Monetary Policy committee (MPC) voted eight to one to keep rates unchanged at their historic lows of 0.5%, where they have now remained for more than six years.

The MPC’s decision comes amid increasing concern over the global economy, as well as signs of slower-than-expected UK growth.

Global stock markets have tumbled since the start of the new year after a run of poor economic data in China and interruptions to trading in Chinese stocks, which saw £85 billion wiped off the value of top flight firms on the London market last week.

Minutes of the latest MPC meeting showed the Bank believes UK growth has also been weaker than it predicted in November and that inflation will remain far below its 2% target for some time yet.

It lowered its outlook for gross domestic product growth in the fourth quarter of last year and first quarter of this year by 0.1 percentage points to 0.5% in each quarter. This follows growth of 0.4% in the third quarter.

The minutes showed the Bank believes “continued quarterly growth at rates of around 0.5% were likely around the turn of the year, a little weaker than the near-term outlook described in the committee’s November Inflation Report”.

Global stocks declined once more on Thursday, as fears around plunging oil prices and the outlook for global growth continued to weigh on markets.

The London Stock Exchange FTSE 100 Index was more than 1% down, while Germany’s DAX and the Cac 40 in France were both more than 2% lower.

The MPC said: “Recent volatility in financial markets has underlined the downside risks to global growth, primarily emanating from emerging markets.”

The MPC said its decision was also influenced by oil prices, with Brent Crude this week dipping below 30 US dollars for a barrel of oil for the first time in 12 years.