Bank of England warns of interest rate hike in the 'coming months'
THE Bank of England has voted to keep interest rates at 0.25 per cent, but warned a hike is on the horizon in the "coming months" due to surging inflation.
Members of the Bank's nine-strong Monetary Policy Committee (MPC) voted 7-2 to keep interest rates on hold, as widely expected, but all policymakers have agreed "some withdrawal of monetary stimulus was likely to be appropriate over the coming months".
The Bank also re-iterated that rates may need to rise by more than expected in financial markets.
In the minutes, the Bank said there was a "slightly stronger picture" for the economy since its forecasts last month thanks to signs of a firmer housing market, stronger employment and a rebound in retail and new car sales.
Meanwhile, Brexit-fuelled inflation is set to climb above 3 per cent in October - higher than the Bank previously expected.
It raised the prospect of a potential rate rise as soon as November, as it said it would "undertake a full assessment of recent developments" at the time of its next quarterly inflation report in two months.
The minutes showed that while two MPC members - Ian McCafferty and Michael Saunders - repeated their call for an immediate rise to 0.5 per cent in the latest decision, the majority of members thought the outlook for growth was still unclear.
In the minutes, the Bank said: "While there had been some signs of growing momentum in activity into the second half of the year... it was too soon to judge whether stronger consumption growth would be sufficient to offset continuing weakness in business investment."
The pound jumped by over one cent against the US dollar on Thursday after the Bank of England indicated that interest rates would be hiked for the first time in over a decade within the “coming months”. The pound also rose to its highest level against the euro since late July.
The hold on interest rates follows news on Wednesday that the UK inflation rate jumped to 2.9 per cent last month
The increase brought an end to a momentary pause in June and July at 2.6 per cent, and matches levels seen in May this year and June 2013.