Bank holds rate steady at 0.75% amid Brexit chaos
The Bank of England has held interest rates at 0.75% once more with Brexit uncertainty reaching its peak as Prime Minister Theresa May battles to secure a delay.
Members of the Bank’s nine-strong Monetary Policy Committee (MPC) voted unanimously to keep rates unchanged.
In minutes of the latest decision, the Bank warned that a short Brexit delay could see business investment pull back even further until a deal is secured.
A short delay may see a “larger immediate reduction”, while firms sit tight and wait for a resolution on the Withdrawal Agreement.
A longer delay, however, may see less of an impact as firms “judge it too costly to wait for any resolution to become apparent”, according to the Bank.
“There was also the possibility of further cliff-edge uncertainties that could have a significant effect on spending as any new deadline approached,” it warned.
But there was some cheer for the economy as the Bank noted a “modest” rebound in consumer spending that is helping to offset the ongoing pressure from falling business investment.
It improved its economic outlook slightly, forecasting growth to edge up to 0.3% in the first quarter of 2019, from 0.2% in the final three months of 2018, thanks to more robust household spending.
Britons appear to be shrugging off the Brexit worries, as official figures also out on Thursday showed a surprisingly healthy 0.4% rise in retail sales last month.
Retail giant Next also said, on posting its annual figures, that shoppers are now “numb” to the political developments surrounding Brexit, with little evidence of an impact on demand for so-called small ticket items.
The Bank’s rates decision comes as Mrs May negotiates with the EU to delay Article 50 to June 30, with just eight days to go until the original March 29 withdrawal date.
It is widely expected to hold rates for some time until greater clarity over the EU withdrawal deal emerges.
The Bank reiterated that its response to any no-deal scenario would not be automatic and that rates could go in “either direction”.
In a welcome sign that businesses are preparing themselves against any shock, the Bank said its latest survey suggested around 80% of firms judged themselves ready for a cliff-edge exit, up from just 50% in the January poll.
It added that there was further signs of stock-building, though this is not expected to have a large impact on gross domestic product (GDP).