Bank of England’s monetary policy committee keeps interest rates unchanged
The Bank of England's monetary policy committee has decided to keep interest rates unchanged as expected.
The rate-setting committee, which raised rates to 0.75 per cent in August, unanimously voted to hold its monetary policy following a meeting on Thursday, meeting the predictions of economists.
The MPC signalled that an "ongoing tightening of monetary policy" may be needed over the next three years to bring inflation down to the two per cent target if the UK has smooth transition following Brexit, but that increases would be gradual.
The committee also unanimously voted to maintain its stock of UK government bond purchases at £435bn and its stock of corporate bonds at £10bn.
It said economic outlook depended significantly on the Brexit deal but warned uncertainty had “intensified” since its last meeting in September, maintaining that the monetary policy response to Britain leaving the EU "would not be automatic and could be in either direction."
The MPC said the UK economy was growing “just above its speed limit” and if continued to develop in line with its projections, monetary policy would be tightened to return inflation to the two per cent target.
The Institute of Directors backed the decision, which it said would be welcomed by business leaders.
Senior economist Tej Parikh said: "With Brexit negotiations going down to the wire, any changes to the cost of borrowing now would ultimately be a stab in the dark with the near-term path of the economy in a constant state of flux."
“Had a deal on Brexit been signed and sealed, the MPC might well have raised interest rates today, given signs that wage inflation is finally picking up and the chancellor announced in his Budget on Monday that taxes will be cut and public spending increased from next April,” PwC chief economist John Hawksworth said.
“But with Brexit uncertainty persisting, it is no surprise that the MPC decided to hold fire on rates for now,” he added.
Morning Wire's shadow monetary policy committee also voted to hold rates at least until the “Brexit fog” cleared.