External monetary policy committee (MPC) member Ian McCafferty voted to maintain the status quo, having been the lone voice in the previous six meetings voting to raise rates.
The record low interest rate of 0.5% has now been in place for 83 consecutive months and looks set to continue as late as 2018.
“Volatile stock markets, tumbling commodity prices, and no-flation: – the backdrop hardly pointed towards the interest rate trigger,” said Nick Dixon, investment director at Aegon UK.
“Indeed there is little prospect of a rate rise until 2017 and, even if the economic outlook brightens in coming months, we expect the MPC to remain dovish throughout 2016. This is good news for households benefitting from favourable credit conditions and low mortgage rates – but will weigh heavily on those relying on their savings for income,” Dixon said.
Slowing growth
On the economic outlook the central bank said it was cutting its growth forecast to 2.2% for this year and to 2.3% in 2017; down from 2.5% and 2.6% expected when it made its last forecast in November 2015.
“Global growth has fallen back further over the past three months, as emerging economies have generally continued to slow and as the US economy has grown by less than expected,” the Bank said in its Inflation Report.
Risk shift
Schroders senior European economist, Azad Zangana, said: “The shift in voting suggests that the balance of risks has shifted to the downside on growth and inflation. Indeed, the MPC meeting minutes suggest that the worsening international outlook has adversely impacted global commodity prices, international trade and has tightened global financial conditions.
“These factors are likely to be having a negative impact on UK growth. The Bank not only lowered its forecast for GDP growth in the near term, but also for inflation as lower energy prices are expected to keep overall cost pressures near zero for longer,” Zangana said.
The committee also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375bn ($522.7bn, €495bn).
“The bottom line of today’s report is that the UK cannot ignore the weakening of global growth prospects – particularly the weakness of global trade – and neither can the Bank of England,” said Stephanie Flanders, chief market strategist for Europe at JP Morgan Asset Management.
