Bank of England Holds Interest Rates

The Bank of England’s 9 members of the Bank’s Monetary Policy Committee (MPC) all voted to keep Interest rates on hold at 0.75% pa in the mist of risks to a UK economic slowdown.

The Bank expects the economy to be level in the 2^nd quarter and global trade tensions to be more serious with US/China trade war and the possibility of a no-deal Brexit.

The latest UK economy growth figures for April fell more than the expected at 0.4% pa, due to car output and easing of Brexit-related stockpiling.

The Bank’s target is to keep inflation +/- 1% of its target 2% pa to help support growth and employment but figures released on Wednesday by the Office for National Statistics show that Inflation had fallen already to 2% pa in May supported the decision to keep interest rates on hold.

Comment

It makes sense whilst there is economic uncertainty to hold the position for now.  We suspect, by design, low interest rates will be kept until the Brexit outcome is known by the end October.  No deal may mean keeping the £ weak with no interest rate increases so that UK exports remain cheap whereas Brexit with a deal may mean interest rates can increase to reflect an economy in a more stable trading position.