BoE's rate-setting committee votes to hold interest rates

The nine-member Monetary Policy Committee (MPC) of the Bank of England (BoE) voted unanimously to hold benchmark interest rates this month, as they keep a cautious eye on strong sterling, according the central bank's meeting minutes published on Wednesday.

The British central bank announced on March 5 that bank rate would stay at 0.5 percent and the stock of asset purchases, or quantitative easing policy, maintain at 375 billion pounds (549.10 billion U.S. dollars).

The MPC restated its central message of the policy guidance released in February: given the likely persistence of headwinds weighing on the economy, when bank rate or benchmark rate did begin to rise, it was expected to do so only gradually, and more slowly than in previous cycles, the minutes showed.

But it added that the persistence of those headwinds, including the strengthening sterling, together with the legacy of the financial crisis, meant that bank rate was expected to remain below average historical level for some time to come.

"The actual path bank rate would follow over the next few years was uncertain, and would depend on economic circumstances. The Committee's guidance on the likely pace and extent of interest rate rises was an expectation, not a promise," showed the minutes.

"There was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the United Kingdom than in the euro area, might continue to put upward pressure on the sterling exchange rate," stressed the MPC.

This had the potential to prolong the period for which CPI inflation would remain below the target of 2 percent and exacerbate the risk that lower expectations of inflation might become more persistent, it noted. Endit