The Bank of England will keep interest rates unchanged at 0.25%, noting slightly greater momentum in the global economy, while warning that the global outlook has become more fragile.
In the summary of its latest Monetary Policy Committee meeting Wednesday, details of which were published Thursday, the BoE said the committee had voted unanimously to maintain interest rates and to continue with its program of buying up to £10 billion ($12.6 billion) in sterling non-financial investment-grade corporate bonds over 18 months. The committee also voted to continue with a program of purchasing £60 billion of U.K. government bonds over a six-month period, taking the total of these purchases to £435 billion. Both programs were announced in August.
The summary said long-term interest rates have risen internationally, including in the U.K., since November, reflecting in part expectations of looser fiscal policy in the U.S. Should this looser policy materialize, that “will help to underpin the slightly greater momentum in the global economy evident in a range of data since the summer.” The U.S. Federal Reserve raised its federal funds rate 25 basis points on Wednesday to a 0.5% to 0.75% range.
However, the summary also warned of risks in China, the eurozone and some emerging markets, and of an increase in policy uncertainty.
Also on Thursday, Norges Bank, Norway's central bank, left interest rates unchanged at 0.5%.
The bank's executive board said in a statement published on its website that expected policy rates for Norway's trading partners have increased since September, oil prices have risen and are now somewhat higher than expected, and the country's currency has appreciated more than expected. “There are prospects that inflation will be lower than projected and that activity in the Norwegian economy is picking up at a somewhat slower pace than projected in September,” the statement said.
“On the other hand, the rapid rise in house prices and household debt has increased the risk of a sharp fall in demand further out,” the statement added. “A lower key policy rate increases the risk of a further acceleration in house price inflation and debt accumulation. The risk of a buildup of financial imbalances and the uncertainty surrounding the effects of a lower key policy rate now suggest a cautious approach to interest rate setting.”
The bank expects rates to remain close to 0.5% in the coming years, and the forecast implies a slightly higher probability of a decrease in rates vs. an increase in the year ahead.