The Bank of England has kept interest rates on hold at 0.75 per cent and warned of the effects of another Brexit delay on the economy.
The unanimous decision by the Bank’s monetary policy committee (MPC) came despite the US Federal Reserve lowering interest rates last night and the European Central Bank (ECB) opting for a cut last week.
In a statement following the MPC’s last meeting before the – now highly uncertain – 31 October Brexit deadline, it said: “The trade war between the United States and China has intensified, and the outlook for global growth has weakened”.
But it also flagged “increased uncertainty about the nature of European Union withdrawal,” which it said meant “the economy could follow a wide range of paths over coming years”.
The MPC said: “The longer those uncertainties persist, particularly in an environment of weaker global growth, the more likely it is that demand growth will remain below potential, increasing excess supply.”
Thomas Pugh, UK economist at consultancy Capital Economics, said: “The key message is that the MPC is a little more dovish about the outlook for inflation and interest rates in the short term than they were in August.”
Alongside its interest rate decision, the MPC voted unanimously to keep its stock of bond purchases, acquired under its huge money-printing programme after the crisis, at their current level of £435bn.
Last week, the ECB chose to restart its giant bond-buying stimulus programme in an attempt to tackle stubbornly low Eurozone growth.
The BoE has remained one of the most conservative major central banks in the face of a global slowdown which has affected Britain. The economy contracted by 0.2 per cent in the second quarter and the latest inflation figure of 1.7 per cent was below the BoE’s target.
Nonetheless, the Bank has held its course. David Cheetham, chief market analyst at online trader XTB, said: “We don’t expect any significant moves on the policy front while Brexit continues to loom large on decision makers’ minds.”
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