UK borrowing costs unchanged, policymakers give recovery time to build

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UK borrowing costs unchanged, policymakers give recovery time to build

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There was no interest rate change from Britain’s central bank at the August policy meeting. The cost of borrowing remained at a record low 0.5 percent.

With the UK economy set to grow by more than 3.0 percent this year, the Bank of England is widely expected to be the first central bank in a major developed nation to raise rates, but for now is giving the recovery more time to build.

There has been speculation that some members of the bank’s Monetary Policy Committee (MPC) favour an increase, but there was no statement issued after their two-day meeting.

That means investors will have to wait nearly two weeks to know if any of them voted for putting rates up when the minutes of the meeting are released.

Markets expect a first hike to come either late this year or early in 2015.

The speculation has pushed up the pound by more than 10 percent against a basket of currencies in the 12 months to early July, although it has fallen back a bit since then.

Some MPC members have said the time is coming to ease off on stimulus after unemployment tumbled to 6.5 percent in the three months to May from 7.8 percent a year earlier.

But others on the MPC point to very slow growth in wages as a sign that the recovery in the UK labour market has further to run before it starts to push up inflation, which was below target at 1.9 percent in June.

Signs that Britain’s economy may have lost some of its momentum may also reduce the likelihood of a rate hike as soon as this year. Growth in the country’s massive services sector remains strong but manufacturing stumbled in May and June.

Other risks to Britain’s recovery include a worsening of tensions in Ukraine which could hurt demand in Europe, and the shock if Scotland votes to leave the United Kingdom in a referendum on Sept. 18.

with Reuters