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Interest rate rise could be pushed back

Thur close: A rise in interest rates may not occur until next May or June after today’s minutes showed the Bank of England in hurry for a change.

Only one member of the Bank’s rate-setting committee voted for a rise in interest rates, according to the first minutes published in the same week as the monthly meeting.

The Bank sees inflation moving only slowly upwards from its current zero rate. Sterling fell on the announcement.

Governor Mark Carney repeated his message that a rise in interest rates is drawing closer, though the markets believe it may not now happen until next summer.

Former CBI executive Ian McCafferty wanted to hike rates at the meeting. They will remain at their record low of 0.5%.

It is thought unlikely that the Bank will make a move to raise rates before the United States Federal Reserve, which is expected to raise rates later this year, possibly next month.

The Bank said it expected inflation to be back to its 2% target in two years’ time.

Stock market turmoil in China and the ongoing debt problems in Greece are casting a shadow over global growth.

Weak productivity growth in the UK was finally on the rise and this may dampen inflationary pressure.

The Bank raised its forecasts for Britain’s overall economic growth this year to 2.8% from 2.5% in its May forecast.

RSA Insurance posted a large jump in first-half profits and reinstated its dividend, but investors were more focused on reports that Zurich Insurance is considering a bid for the company at around 525p per share, versus the 600p RSA is said to be looking for.

Rio Tinto climbed after reporting a fall in first-half profits that beat analysts’ forecasts. The company said cost improvements, lower energy costs and positive currency movements offset nearly 40% of the $3.6bn impact of lower prices.

Aviva advanced after it posted solid half-year operating profits growth and lifted its dividend 15% to indicate its confidence in the future as it raced to reap the benefits of its 10 April acquisition of rival Friends Life. Shire slumped following reports that the chief executive will have to sweeten its bid for US biotech company Baxalta.

The FTSE 100 closed at down -0.8% at 6,747.09.

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