| 2°C Dublin

UK rates held steady as BoE readies for Brexit

Close

Bank of England governor Mark Carney

Bank of England governor Mark Carney

REUTERS

Bank of England governor Mark Carney

The Bank of England kept interest rates on hold in governor Mark Carney's final meeting, waiting for more evidence of an economic rebound before supporting it with a cut.

Policymakers voted 7-2 to keep the benchmark at 0.75pc, an unchanged split from their previous meeting.

The committee noted that surveys of business activity had picked up "quite markedly in some cases" since prime minister Boris Johnson's election victory removed much of the near-term uncertainty related to Brexit.

Yet officials also signalled easing may be needed soon, cutting GDP forecasts to the lowest level since the global financial crisis and predicting inflation will only return to target by the end of 2021.

Mr Carney also stressed the updated economic projections assumed "an immediate but orderly move" to a new "deep free trade agreement" with the EU at the end of the year.

"This is less of a case of so far so good, and more a case of so far, good enough," Mr Carney said in a news conference.

The pound rose to its highest in a week, trading 0.6pc higher at $1.3098.

Investors are no longer fully pricing in a rate cut this year. Prior to the decision, they had expected one by August.

If EU trade talks struggle or the economy weakens anyway, the decision on a BoE response will fall to Mr Carney's successor, Andrew Bailey. He will take up his post in mid-March, the same month the UK government unveils a budget that ends almost a decade of austerity.

That fiscal boost is not included in the current forecasts, and officials said slower-than-expected supply growth will keep a lid on the expansion.

"Policy may need to reinforce the expected recovery in UK GDP growth, should the more positive signals from recent indicators of global and domestic activity not be sustained, or should indicators of domestic prices remain relatively weak," minutes of the BoE meeting showed.

Bloomberg

Irish Independent