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The Bank of England has held the benchmark interest rate at 0.5 per cent in a unanimous 9-0 vote.

The central bank confirmed it thinks “further modest increases” in interest rates are likely to be needed to help bring inflation down to its target of 2 per cent over the next few years.

In minutes of its December Monetary Policy Committee meeting published on Thursday, the members showed they were relaxed about inflation’s rise to 3.1 per cent in November, voting unanimously for no change in interest rates and no change to the money the central bank has printed in its quantitative easing process. (Its statement is here.)

The lack of any comment on the path of interest rate rises predicted by financial markets suggests the MPC is happy with expectations that the authorities will tighten policy up to two times next year, once likely in May and the other possible towards the end of 2018.

If the BoE follows this course, it would bring official interest rates up from 0.5 per cent now towards 1 per cent by the end of next year. Though borrowing would become more expensive, that rate would still represent a historically low level of interest rates and would still be encouraging households and businesses to borrow and spend.

The MPC agreed that the economic news since it raised interest rates at the start of November had been “mixed and relatively limited”.

It said that world economic strength was still helping the UK and the Budget’s additional public spending would limit the effects of austerity on the economy. But it cautioned that domestic indicators suggested “growth in Q4 might be slightly softer than in Q3”, when the economy expanded 0.4 per cent.

The nine members of the committee did not consider these changes to be sufficiently significant to require any immediate action.

Inflation had moved up to 3.1 per cent in November, the minutes said, because the weakness of sterling had pushed up the cost of imports. “The MPC judges that inflation is likely to be close to its peak, and will decline towards the 2 per cent target in the medium term,” the minutes added.

With the committee now believing the UK economy cannot grow much faster than 1.5 per cent a year without pushing up inflation, the BoE’s outlook for the economy and living standards remains weak and much less optimistic than before the EU referendum.

This has led the members to stress again that more interest rate rises are likely to become necessary.

“The committee remains of the view that, were the economy to follow the path expected in the November inflation report, further modest increases in Bank Rate would be warranted over the next few years, in order to return inflation sustainably to the target,” the minutes of the meeting said.

Despite progress in the Brexit negotiations, the MPC members agreed that the biggest source of uncertainty for the British economy was the UK’s changing economic relationship with the EU.

The next MPC meeting will take place in early February and coincide with a quarterly inflation report and the governor’s letter to the chancellor explaing why inflation reached 3.1 per cent in November and what the MPC was proposing to do to bring it back to target.

The pound was little changed after Thursday’s decision. It traded at $1.3427, from $1.345 ahead of the news. That left it up 0.04 per cent on the day.

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