LONDON, Dec 14 (Reuters) - The Bank of England stuck to its guns on Thursday and said British interest rates needed to stay high for 'an extended period', a day after the U.S. Federal Reserve signalled it would cut U.S. interest rates next year.
The BoE's Monetary Policy Committee voted 6-3 to keep rates at a 15-year high of 5.25%, in line with economists' expectations in a Reuters poll last week.
There was no discussion of cutting interest rates, and the BoE remains concerned that inflation in Britain will continue to be stickier than in the United States and the euro zone.
The central bank also largely shrugged off data showing a slowdown in wage growth and a 0.3% fall in gross domestic product in October - which raises the prospect of a recession in the run-up to a national election expected for 2024.
The BoE's policy stance - which assumes a gradual fall in interest rates to 4.25% in three years' time - is sharply at odds with the latest market expectations which see rates dropping to that level before the end of next year.
"Successive rate rises have helped bring inflation down from over 10% in January to 4.6% in October. But there is still some way to go. We'll ... take the decisions necessary to get inflation all the way back to 2%," Governor Andrew Bailey said.
The three policymakers who dissented wanted a further hike to 5.5%, and for most of the remainder the decision not to raise rates had been "finely balanced", minutes of their policy dicussion showed.
The BoE's main policy message is unchanged from November, when it forecast it would take two years to return inflation to target.
Although the near-term outlook for inflation was likely to be slightly lower than the BoE expected last month, policymakers' longer-term concerns remained.
"Relative to developments in the United States and the euro area, measures of wage inflation were considerably higher in the United Kingdom and services price inflation had fallen back by less so far," the BoE said.
However, British 10-year government bond prices have fallen by a full percentage point since late October as markets bet on looser central bank policy in Britain as well as abroad.
The BoE noted that bond yields had fallen "materially" and said it would take this into account in its next quarterly forecast update in February.
A Nov. 22 budget statement by finance minister Jeremy Hunt was likely to boost gross domestic product by a quarter of a perentage point over coming years, but have more limited inflation implications, the BoE added.
The only BoE policymaker to have discussd the timing of a rate cut recently has been Chief Economist Huw Pill who shortly after November's decision said the market expectations then for a first rate cut in August 2024 "doesn't seem totally unreasonable".
Two days later, Bailey said it was "really too early" to discuss when rates might be cut. (Reporting by David Milliken, Andy Bruce and Suban Abdulla) Keywords: BRITAIN BOE/
