Bank of England maintains 7-2 split to hold rates

The Bank of England remained split earlier this month on whether to hike UK interest rates despite economists' expectations that a rate rise may not now happen until late next year.

Members of the BoE's Monetary Policy Committee (MPC) voted 7-2 in favour of keeping the cost of borrowing at 0.5% for the fifth month in a row.

They also unanimously voted to keep quantitative easing at £375bn. The last time members voted to change asset purchases was in June 2013, when three members backed an increase.

The only members of the committee to vote for a 25 basis-point rise in rates in December were Ian McCafferty and Martin Weale.

The MPC said sharp falls in oil prices and more reductions in market interest rates should stimulate growth in the UK and its main trading partners while consumer-price inflation was expected to dip below 1% in the near-term.

The MPC said recent signs of a pick-up in wage growth were promising, but noted that pay growth was currently only roughly in line with, rather than in excess of, productivity growth.

"Further increases in pay growth, as labour market slack continued to decline, would be required to be consistent with the 2% inflation target in the medium term, " the minutes said.

"For most 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."

Capital Economics' senior UK economist Samuel Tombs said Wednesday's job figures showing a 115,000 rise in employment in the three months to October, plus evidence from surveys, may give the MPC some reassurance that a recovery in pay growth was on track.

But Tombs added: " Accordingly, we continue to think that markets might have gone a bit too far in expecting the MPC to wait another year before raising interest rates and still expect Bank Rate to rise to 1% by the end of 2015."

Howard Archer at IHS Global Insight said: "The December MPC minutes are likely to reinforce the belief that the Bank of England will not be raising interest rates before late-2015, and could very well wait until 2016.

"Indeed, expectations that the Bank of England will not be raising interest rates for some time to come have been hardened by consumer price inflation dipping to a 12-year low of 1% in November and looking set to imminently drop below 1%."