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Strength of sterling and renewed oil weakness push back rate rise

07 Aug 2015

The strength of sterling over the past three months, and oil prices falling back towards their recent lows, mean that the timing of the next interest rate rise has been pushed back - to February 2016 at the earliest

The stronger currency has lowered the cost of most imports, and the falling oil price translates directly to lower prices for fuel and energy - meaning that both these forces are already having the same deflationary effect that a rate rise would have.

Analysts expected more than one member of the MPC to vote for a rate rise, thus sterling fell around 1% against the dollar and euro following the announcement, but recovered most of this ground later

Whilst UK business and domestic economic confidence remains high, due to robust trading and real wage increases, the MPC noted that global economic risks were now slightly skewed to the downside, citing euro area risks and the Chinese economic slowdown

For the full MPC release see here

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