The deal struck at the meetings held on 7 and 8 January was “finely balanced” in comparison to the decision reached last month where two members of the MPC voted for an increase in the Bank Rate.
Last month, Ian McCafferty and Martin Weale, voting against the proposition, believed that the sharp fall in inflation to below the 2% target was likely driven by temporary factors, preferring to increase the Bank Rate to 0.75%.
Inflation dropped to a surprise 12-year low of 1% at the end of 2014, spurred by falling oil prices and drops in transport costs.
Ben Brettell, senior economist at Hargreaves Lansdown, said the impact of lower oil prices and the battle between supermarkets to lower prices could keep inflation below 1% for a number of months.
“This marks a significant shift in the expected path for interest rates. Many forecasters had been expecting the first rise to come later this year, but this now looks extremely unlikely.
“This further reinforces my view that they will remain on hold throughout this year and into 2016.”
The MPC said inflation could persist below its target of 2% for longer than previously expected due to the continued decline in oil prices and the drop in inflation globally.
The meeting minutes read: “In the view of all members, the outlook justified maintaining both the current level of Bank Rate and the stock of asset purchases financed by the issuance of central bank reserves.
“It was possible that the risks to CPI inflation in the medium term might have, if anything, shifted to the upside, but all members were also alert to the downside risk of current low inflation becoming entrenched. Monetary policy could and would be adjusted at the appropriate time to ensure that CPI inflation was on track to meet the 2% target in the medium term.”
