That might be a relief to mortgage borrowers on tracker deals, but is a blow to those saying rates need to go up to control inflation. The Bank of England today upgraded its forecast for peak inflation, warning price rises will hit 5% early next year.
A rate rise next month or early next year still seems a racing certainty.
Today the nine-strong MPC voted 7-2 to hold rates.
The two in favour of a hike are Michael Saunders , an external MPC member, and Sir Dave Ramsden, the deputy governor for markets and banking.
The pound fell sharply on the news. It lost nearly 1% against the dollar to $1.3561.
Rachel Winter, Associate Investment Director at Killik & Co, said: “Although markets had priced in a 58% chance of a rate rise taking place this month, the Bank of England has chosen to leave rates on hold for the time being.”
She added: “This of course will be at the displeasure of many who are becoming increasingly worried about inflation. Despite a small drop in CPI in September from 3% to 2.9%, the inflation rate is still above the Bank of England’s 2% target, and furthermore the Office for Budget Responsibility expects it to remain high in 2022 and 2023.”
The move by the Bank to hold fire must have been a close call. In recent weeks members of the Bank’s Monetary Policy Committee have signalled their willingness to move fast to protect against inflation.
The Bank said today it expects inflation to rise to around 5% in the Spring, but then fall back.
It thinks rates will only need to go up “modestly” to return inflation to the 2% target.
The Bank also left its quantitative easing programme unchanged at £895 billion. That was a closer 6-3 split, with Catherine Mann joining Ramsden and Saunders in voting to curtail QE.
Paul Dales at Capital Economics said: “Rates are going up, but no-one knows when. But I have more confidence in our view that rates won’t rise next year as far and fast as the markets expect.”