Bank of England holds rates steady and lowers UK growth forecast
Mark Carney, governor of the Bank of England (BOE), gestures while speaking during the bank’s quarterly inflation report news conference in the City of London, U.K., on Thursday, Aug. 2, 2018.
Simon Dawson | Bloomberg | Getty Images
The Bank of England has held its main interest rate steady at 0.75% with its rate-setting committee voting 7-2 in favor of keeping the current level.
The central bank maintained the dovish stance exhibited after its previous meeting, commenting in an accompanying statement: “If global growth fails to stabilize or Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected U.K. recovery.”
Its forecast for U.K. GDP (gross domestic product) growth in the fourth quarter of 2019 was cut to +0.1% from the November forecast of +0.2%, reflecting the weakening of economic conditions shown in recent data.
“Household consumption has continued to grow steadily, but business investment and export orders have remained weak. Financial markets have remained sensitive to domestic policy developments,” the Bank said in a statement.
The Bank’s Monetary Policy Committee (MPC) also voted unanimously to maintain its asset purchase scheme, which currently holds £435 billion ($569.62 billion) of government debt and £10 billion of corporate bonds.
Two policymakers, Jonathan Haskel and Michael Saunders, voted to cut the main interest rate to 0.5%, as was also the case in November.
On the U.S.-China trade war, the Bank of England said the “partial de-escalation of the U.S.-China trade war gives some additional support to the outlook” but highlighted that continued signs of loosening in the U.K. labor market was another potential headwind.
Bank of England Governor Mark Carney is due to step down at the end of January after more than seven years at the helm, with Prime Minister Boris Johnson yet to name a successor.
The central bank has been grappling with uncertainty over Brexit for the past three years, and fears of the U.K. departing the EU without a deal resurfaced this week.
Following the Conservative Party’s landslide election victory, which all but ensures the U.K. will leave the bloc before the January 31 deadline, Johnson vowed to block any extension to the post-exit transition period beyond the end of 2020.