Bank of England freezes rate, hikes growth forecast

The Bank of England has voted to leave its main interest rate at a record-low 0.50 percent in the face of zero inflation, it said Thursday.

At the same time, the BoE raised its forecast for British economic growth this year to 2.8 percent from a previous estimate of 2.5 percent.

Despite the central bank maintaining the key rate, governor Mark Carney insisted that the time for a hike is moving closer.

"The likely timing of the first bank rate increase is drawing closer," he told a press conference Thursday.

"However the exact timing of the first move cannot be predicted in advance... In short, it will be data dependent."

Analysts' consensus is for the rate to begin rising early next year amid steady British economic growth, having remained unchanged since March 2009.

"Speculation had been intensifying that the Bank would swiftly follow the US Federal Reserve, which appears set to raise rates in September," said Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.

The BoE on Thursday said its Monetary Policy Committee "voted by a majority of 8-1 to maintain Bank Rate at 0.5 percent."

The nine-member MPC also maintained the central bank's level of cash stimulus pumping around the British economy at £375 billion ($583 billion, 534 billion euros), it added in minutes published following a regular monthly policy meeting

It was the first time that the central bank had published minutes immediately after the meeting -- a switch made by Canadian national Carney that is aimed at providing more transparency.

"The near-term outlook for inflation is muted," added the minutes, which prior to Thursday were traditionally published two weeks after a meeting.  

"The falls in energy prices of the past few months will continue to bear down on inflation at least until the middle of next year," they added.

Britain's annual inflation rate turned flat in June from the previous month, also on the back of falling clothing and food prices, recent official data showed.

The BoE's main task is to use monetary policy as a tool to try and keep 12-month inflation close to a government set target of two percent.

"It does appear that the recent falling back in oil prices and sterling's strength has reduced the MPC's perceived need to tighten monetary policy in the near term," Howard Archer, chief UK economist at IHS Global Insight, said Thursday.

The BoE's main interest rate has remained unchanged for six and a half years to support the British economy's recovery following the global financial crisis of 2008.