Morning Wire’s shadow monetary policy committee votes to hold interest rates amid peak Brexit uncertainty and global slowdown

The Bank of England must hold interest rates when its monetary policy committee meets tomorrow amid peak Brexit uncertainty and a global economic slowdown, City economists have warned.

The Bank’s rate-setting monetary policy committee (MPC) will announce its decision at midday but is expected to leave rates unchanged at 0.75 per cent.

Read more: Household spending reaches pre-crisis levels as labour market strengthens

Morning Wire’s shadow monetary policy committee unanimously voted in favour of holding rates for the fourth consecutive meeting, once again citing Brexit concerns and growing uncertainty.

This month’s chair Tej Parikh, economist at the Institute of Directors, said the speed of travel for hikes remained “inextricably linked” to the outcome of Brexit and that uncertainty was checking domestic demand.

Along with a potential global slowdown and businesses shelving investment plans for the time being, he said it was hard to justify raising the cost of credit.

Read more: Morning Wire shadow MPC unanimously votes to hold rates amid 'Brexit fog'

The UK inflation rate dropped to 2.1 per cent in December, its lowest level in nearly two years and below the Bank’s expectations.

Guest Chair: Tej Parikh, Institute of Directors

HOLD

The speed of travel for interest rate hikes remains inextricably linked to what happens on 29 March. Right now, uncertainty is checking domestic demand.

Businesses have been shelving investment plans, and consumers are also tightening their belts as Parliament remains in deadlock.

Meanwhile, a potential global slowdown is adding a downside risk to the U.K.’s future economic growth.

This makes it hard to justify raising the cost of credit, even if domestic inflationary pressures may begin to build off the back of improved pay growth.

Vicky Pryce, CEBR

HOLD

There are no signs of accelerating inflation despite higher employment while UK service and manufacturing surveys suggest slower growth and weaker orders among increased Brexit uncertainty and continuing world trade disputes.

Jeavon Lolay, Lloyds Bank

HOLD

Brexit negotiations remain key to the UK outlook. The softening in global and UK activity indicators also signal caution at this time, notwithstanding recent robust UK labour market data.

Ruth Gregory, Capital Economics

HOLD

With inflation falling to within a whisker of its 2% target, economic activity weakening and the possibility of a no deal Brexit hanging over the economy, the current stance remains appropriate.

Simon French, Panmure Gordon

HOLD

Despite firming wage inflation the trajectory for headline inflation remains down thanks to the recent fall in the global oil price. Holding UK Bank rate while Brexit discussions reach a crucial junction is the responsible approach right now.

Kallum Pickering, Berenberg

HOLD

Peak Brexit uncertainty warrants a cautious ‘wait and see’ approach for now. Send a signal for a rate hike when and if a Brexit deal is agreed.

Mike Bell, JP Morgan Asset Management

HOLD

With ongoing uncertainty around the Brexit negotiations weighing on business and consumer confidence and with Italy in recession, a rate rise this week would be premature.

Jacob Nell, Morgan Stanley

HOLD

With Brexit uncertainty, and weaker recent growth and inflation, the MPC should stay on hold, while noting that pay at a cycle-high and a positive output gap point to rising inflation risks.

Simon Ward, Janus Henderson

HOLD

Hold but a switch to easing bias. The economy is flatlining, inflation is near target and monetary trends remain weak. A bias shift could support Brexit-infected business and consumer confidence.