Following 14 successive increases, September's MPC meeting decided to leave Bank Rate steady at 5.25 percent. A 25 basis point rise to 5.50 percent had been widely expected prior to yesterday's surprisingly weak August inflation report but going into today's announcement investors were quite evenly split. Much the same can be said of the MPC itself which again only secured the latest decision by a majority vote, and this time by just 5-4. Swati Dhingra, the leading dove, inevitably continued to push for no change and was joined by four of the other nine members, including Governor Andrew Bailey who ultimately provided the casting vote. However, the remaining four participants (Jon Cunliffe, Megan Greene, Jonathan Haskel and Catherine Mann) all wanted another 25 basis point rise.

The MPC also updated its target for QT over the coming 12 months. Asset sales will aim to reduce the stock of gilts held in the Asset Purchase Facility by £100 billion to £658 billion, commencing October this year. This is a step-up from the £80 billion cut targeted in the 12-month period just ending but the first round also included around £20 billion of corporate bond sales so the overall impact should be much the same.

In any event, the more important decision to hold Bank Rate steady reflects a softer view of the economy and further signs of a looser labour market. With regard to the latter, the bank acknowledged that wage growth remained very strong but also noted that the official data were difficult to reconcile with other measures which suggested that wage rates were broadly stable. Importantly too, both headline inflation (6.7 percent) and the core rate (6.2 percent) were much weaker than expected last month

Today's announcement probably means that Bank Rate has reached its peak for this cycle. However, for now, the risks remain skewed to the upside. The labour market is easing but at a slow enough pace to accommodate still ominously high wage growth. Indeed, even if the bank looks at alternative gauges to those provided by the ONS, they still show wage rates uncomfortably high. Without some cooling here or an improbably sharp improvement in productivity, meeting the 2 percent inflation target over an acceptable time horizon is likely to prove all but impossible.

The August inflation report held out hope that the underlying trend is moving in the right direction but was far enough removed from expectations that it could prove to be a one-off. The closeness of the vote shows how mixed views are on the MPC and means that, for now at least, wages and prices remain the key to where policy goes next.

Having raised Bank Rate by 50 basis points in June then by 25 points in August, the market consensus is looking for another 25 point hike at this month's meeting.

The Monetary Policy Committee (MPC) of the Bank of England (BoE) comprises nine experts, five of which are senior central bank executives and the other four are external members appointed by the Chancellor of the Exchequer. The MPC previously announced its monetary policy with regard to interest rates and any unconventional policy instruments every month but this was changed when the meeting schedule was truncated to eight a year in 2016. With a view to enhancing policy transparency, as of August 2015 the minutes of the MPC's deliberations, which indicate how each member voted, have been released alongside the policy announcement. Forward guidance was introduced in August 2013 but since then its framework has become increasingly qualitative and now provides only limited information about where policy might be headed.

The Bank of England determines interest rate policy at their Monetary Policy Committee meetings. These meetings currently occur during the first week of each month and are an influential event for the markets. Prior to each meeting, market participants speculate about the possibility of a change in the benchmark Bank Rate or unconventional monetary instruments. The MPC may or may not issue a post-meeting statement explaining its decisions in addition to the discussion’s minutes which, since August 2015, have been released alongside the policy announcement. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching. In the middle month of each quarter, the Bank publishes its Inflation Report, which provides a detailed analysis of economic conditions and the prospects for economic growth and inflation agreed by the MPC. This is now made available at the same time as the policy announcement and release of the minutes.

The Bank's monetary policy objective is to deliver price stability - low inflation - and, subject to that, to support the Government's economic objectives including those for growth and employment. A remit announced by the Chancellor in March 2013 hinted that the real economy may have a larger say in policy decisions going forward. Price stability is defined by the Government's medium-term inflation target of 2 percent, as measured by the annual change in the consumer price index. The foundation of the Bank's policy is the recognition of role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.

As in the United States, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on British markets - and to some extent those in Europe - can be dramatic and far-reaching. The interest rate set by the Bank of England, serves as a benchmark for all other rates. A change in the rate translates directly through to all other interest rates from gilts (fixed interest government securities named after the paper on which they were once printed) to mortgage loans.

The Bank of England sets an interest rate (Bank Rate) at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.