The Bank of England has failed to raise interest rates again, pushing back forecasts for the first rise since 2009.
The central bank suggested in its latest quarterly inflation report that there would not likely be a hike in interest rates until 2017 and said that when there is it will be a gradual increase.
This is good news for borrowers who have been served up a number of low interest mortgage deals by lenders in recent months.
Low inflation and an uncertain global outlook have prompted the BoE to reconsider raising interest rates which have been stuck at 0.5% since 2009.
The BoE’s Monetary Policy Committee voted by a majority of 8-1 to keep the rates on hold.
The Bank said the outlook for global growth has weakened since August due to a slowdown in emerging markets
It expects inflation will remain close to zero for the remainder of the year as a result of low oil prices and cheap imports. While inflation is expected to pick up in 2016, it will stay under 1% until the second half of the year.
The MPC predicted inflation would slightly exceed the 2% target in two years and then rise a little further above it, reflecting modest excess demand.
Compared with the committee’s August projections, the Bank said inflation was “likely to remain lower until late 2017”.
The Bank said: “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. This guidance is an expectation, not a promise. The actual path Bank rate will follow over the next few years will depend on the economic circumstances.”
