Investing.com - Minutes from the Bank of England’s policy meeting showed that all nine members of the monetary policy committee (MPC) were in favor of leaving the key interest rate at a record low of 0.5% and noted the difficulty involved in interpreting macroeconomic and financial market indicators over the next few months given the upcoming vote on Britain's membership in the European Union.
The BOE said it was holding the benchmark interest rate at 0.50%, in a widely expected move. The rate has been held at that level since March 2009.
The central bank also said it was to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion.
All nine MPC members also unanimously agreed to make no changes to the central bank's £375 billion asset-purchase program.
According to the minutes, the MPC noted that the current shortfall in inflation (at 0.5% compared to the 2% target) is “due predominantly to unusually large drags from energy and food prices, which are expected to fade over the next year” and noted that core inflation also remain subdued.
The BoE further noted that there was mixed news on near-term prospects for global growth, but that domestic growth has been steady and it expected inflation to rise over the next year, thanks to the pickup in the price of oil and the recent depreciation seen in the pound.
The bank also said that it expected “more likely than not” to raise rates over the forecast period, but noted that the uncertainty surrounding the upcoming June 23 referendum on the U.K.’s membership in the European Union meant that “macroeconomic and financial market indicators harder to interpret over the next few months, and the Committee is likely to react more cautiously to data news over this period than would normally be the case”.
"All members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles," the minutes showed.
The MPC concluded that the aforementioned statement was based on expectations and should not be considered a "promise" as all future decisions would be data-dependent.
The pound had seen weakness in the lead up to the report based on media sources suggesting that two MPC members, Andy Haldane and Gertjan Vlieghe, could vote to cut interest rates. After the release, GBP/USD was trading at 1.4147 from around 1.4142 ahead of the announcement, while EUR/GBP was at 0.7957 from 0.7958 earlier.
Meanwhile, little change was seen in European stock markets. London’s FTSE 100 dropped 0.08%, the EURO STOXX 50 rose 0.19%, France's CAC 40 slipped 0.08%, while Germany's DAX inched down 0.02%.