The Monetary Policy Committee (MPC) of the Bank of England (BoE) discussed financial market developments, the international economy, money, credit, demand and output and supply, costs and prices in addition to making its immediate policy decision.
There had been a pick up in volatility in financial markets triggered by political uncertainly in Greece, more evidence of a low global inflation and the consequences of falls in oil prices for oil-exporting countries.
Short term interest rates in the UK and the US have diverged. One year sterling rate one year ahead declined by close to 20 basis points whereas the equivalent dollar date had risen by nearly 5 basis points.This divergent is reflected in foreign exchange markets where the US dollar effective exchange rate (ERI) had appreciated by a further 3% on the month to a level 10% higher than a year earlier.
Twelve-month CPI inflation had fallen to 1.0% in November, the lowest rate since September 2002. The fall in CPI on the month was largely due to lower fuel prices and utility price increases. The CPI inflation is expected to reach a trough of zero in March due to lower oil prices with even a chance to dip below zero in the first half of 2015.
The unemployment rate is down to 6%, with short term employment matching pre-crisis levels.
Generally, growth remained solid in the UK and the US. Medium term outlook on growth and inflation would depend on these factors: effects of reduced energy, food and other imported prices on CPI, inflation expectations, pace of aggregate demand growth and evolution of the labour market.
The committee voted 9-0 in favour of maintaining bank rates which was a change from the previous period`s 7-2.
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