European stock markets gained while sterling sank after the Bank of England poured cold water on the idea that the road is clear for rate hikes sooner rather than later. David Pollard reports.
After the US Fed's shock hint it stands ready to hike next month, the stage was set for the Bank of England to produce some drama of its own. It wasn't to happen. (SOUNDBITE) (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "Certainly, the headlines are familiar. Inflation remains close to zero. I've written another open letter to the Chancellor explaining why and what we intend to do about it. The MPC has voted again by a majority of 8-1 to maintain Bank Rate at half a per cent." Sterling fell a full cent on the decision - analysts spoke of a "surprisingly cautious" approach from BoE governor Mark Carney. In contrast to Fed chief Janet Yellen and two senior colleagues pointing to December as a "live possibility" for a rise. That's despite the strong headwinds many see coming out of emerging markets - and of course, China. Others see risks for the UK right on its doorstep. IG's Alastair McCaig. (SOUNDBITE) (English) IG MARKET ANALYST, ALASTAIR MCCAIG, SAYING: "The biggest issue still remains the fact that the euro zone is our largest trade partner and their recovery is far from a fluid and smooth process at this point in time." But Commerzbank's Peter Dixon says the Fed could trigger the BoE too. (SOUNDBITE) (English) GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON, SAYING: "There's definitely a case for waiting until the Federal Reserve has acted, but on the assumption that the Fed acts in December, then I think there's a very strong possibility we could see a rate hike from the UK in February of next year, and if not then, then certainly by May." That's close to the view of economists in a Reuters poll, who see a hike in the second quarter of next year. In the meantime, UK rates are where they are for a record 80th month.