All nine members of the Bank of England's Monetary Policy Committee voted to keep interest rates at 4.5 per cent this month, not even discussing arguments for a cut, minutes of their meeting showed this morning.
Analysts had expected the 9-0 vote at the October 6th meeting but there had been a suspicion that at least a few members would have presented a case for cutting borrowing costs due to evidence that the economy was still sluggish.
The minutes revealed no such discussion, sending interest rate futures plummeting and the pound up a quarter of a cent against the dollar as dealers scaled back bets for rate cuts soon.
"I'm surprised they haven't talked about a rate cut at all," said George Buckley, chief UK economist at Deutsche Bank.
"I think these minutes are fully consistent with them having to wait until next year." The minutes said that on balance the short-term prospects for growth and prices were little changed from the Bank's August Inflation Report, although some MPC members judged the downside risks to demand had increased.
The MPC would have more time to assess the demand and supply outlook when it prepared its next set of forecasts in November. MPC members are clearly worried by the impact of high oil prices, saying there was no room for complacency, although there had been little sign of energy costs spreading into the broader inflation rate via second round effects.
"If such effects were to take hold, the Committee would need to run a tighter monetary policy than would otherwise have been the case," the minutes said.
The minutes said that while CPI inflation was likely to increase in the short-term, the energy effect was likely to fade by the year-end as long as oil prices did not rise any further.
Output growth, the minutes noted, continued to be subdued but official data may be exaggerating its weakness as business surveys were more upbeat on the service sector.
The MPC noted that second quarter consumption growth had been revised up but remained a little weaker than what it had envisaged in August.