The Bank of England (BoE) left interest rates and its asset purchase target unchanged on Thursday, as an improving economy continues to add to speculation that a rate hike could be around the corner..
As expected, the bank decided to hold off on adding to the £375 billion ($569 billion) of asset purchases it has unleashed over previous years and kept its main benchmark rate at a record low of 0.5 percent. The decision tallied with a Reuters poll of economists who all predicted that the current rate would remain unchanged.
The bank might be waiting to see what the U.S. Federal Reserve does next week and Governor Mark Carney seems in no rush to make a move as inflation still remains so low.
However, with decent economic data in the U.K., including some modest growth in wages, some are cautiously predicting a rate hike by mid-2016.
"We expect interest rates will finally move up in 2016, but this is not a stone dead certainty. And we have to admit making a similar comment a year ago, regarding interest rates being likely to start inching up in 2015," Howard Archer at IHS Global Insight said in a note on Friday.
Archer expects the bank to act in May, after which it will likely wait for a while to see how the economy reacts to the hike. "It is also very possible that the economy may be hampered by increased uncertainty ahead of the referendum on EU membership that could well occur in the second half of 2016," he said.