LONDON The Bank of England looks likely to signal another delay in raising interest rates on Thursday thanks to a renewed oil price slump, sputtering wage growth and the approach of an unsettling vote on Britain's European Union membership.
Amid signs of a weakening in Britain's economic recovery and doubts about how hard China's slowdown will hit the world economy, some economists are pushing their forecasts for a first BoE rate hike to as far back as November.
"It feels like one-way traffic," RBS economist Ross Walker said. "Most of the developments since their last meeting seem to be pushing in a disinflationary direction."
It has already been almost seven years since the Bank cut borrowing costs to 0.5 percent as the financial crisis tipped Britain into a deep recession.
Until about three months ago, BoE Governor Mark Carney had signalled that a decision on whether to raise rates would become clearer around now. That led to expectations the BoE would move shortly after the U.S. Federal Reserve, which lifted borrowing costs for the first time in nearly a decade in December.
But with inflation still stuck at just above zero, it is clear is that a rate hike will not happen any time soon. Sterling has fallen to its lowest against the dollar in more than five years.
Carney is expected to come up soon with his latest message to sum up the Bank's outlook, possibly on Jan. 19 when he is due to give a lecture at the University of London.
Of the BoE's nine rate-setters, only one, Ian McCafferty, has been voting for a hike. Some economists expect he might now rejoin the fold and vote for no change given the signs that inflation is not about to rise sharply.
At the same time, the members of the Monetary Policy Committee will probably want to avoid giving the impression that they agree with signals in financial markets that suggest investors think a rate hike will only come well into 2017.
The Bank is due to announce its monthly decision on rates at 1200 GMT and the details of the MPC's debate will be scoured by investors for signs of just how concerned they are about the weakening growth outlook and a slump in share prices.
More than the latest fall in oil prices to close to 12-year lows, the Bank is focused on growth in the wages of British workers, which has slowed despite a retreat in unemployment back to almost pre-crisis levels.
The BoE's policymakers may also be worried about data that showed Britain's economy grew more slowly than previously thought and a recent fall in industrial output.
The fall in sterling might help push up inflation, but is unlikely to make much difference given rock-bottom commodity prices.
Economists expect to get a detailed understanding of the Bank's latest thinking next month when it publishes new forecasts. A cut to its growth estimates would all but rule out a rate hike in the first half of this year.
After that, the chances of a move by the BoE could be delayed further by a planned referendum on Britain's membership of the EU which might take place in June or possibly September.
Philip Rush, an economist at Nomura, said he had pushed back by six months his forecast for a first hike to November, adding that the BoE would not be willing to risk a rate hike before the EU vote, which had the potential to upset Britain's economy.
(Editing by David Milliken and Catherine Evans)