The prospect of a base rate hike has receded even further after Bank of England governor Mark Carney said now is not the time to hike rates.
Speaking yesterday, he said the "shocks" facing the Bank are different to those challenging the US Federal Reserve, which hiked rates in December.
With new monetary policy committee (MPC) member Dr Gertjan Vlieghe stating that rates will stay low for "a very long time” today's record low mortgage rates seem likely to persist.
This is despite new figures published yesterday showing CPI rising slightly to 0.2%, up from 0.1%.
Carney said that pricing presses in the US were stronger while the UK is a more open economy and therefore has been hit harder by the global slowdown.
Cuts by the Conservative government and the recent strength of the pound will also slow the economy, he said.
Jeremy Cook, chief economist at international payments company World First, said:
“Sterling and rate expectation of a Bank of England interest rate rise have taken a one-two punch in the past from both the Governor and the newest member of the MPC.”
As a well-known dove, Dr Vlieghe’s comments were expected, but Carney change of tone came as a surprise, Cook said.
“Carney’s speeches in the past had shown him to be leaning towards higher rates sooner rather than later.”
Cook said inflation is now the key number determining a rate hike. "Inflation is the be-all and end-all it seems.”