Breaking News

Bank of England Leaves Rates Unchanged Ahead of Brexit Deadline

Economic IndicatorsFeb 07, 2019 07:09AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. - The Bank of England left its key interest rate unchanged for the fourth straight meeting, as expected, with all nine members of its policy-making committee again voting not to rock the boat as the U.K. prepares to leave the EU.

The bank noted that U.K. economic growth slowed in late 2018 and “appears to have weakened further in early 2019. This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home.”

With just 50 days until the deadline for the U.K. to leave the EU, the economy is showing clear signs of slowing down, as uncertainty leads companies to put off investment decisions, while a steady stream of unsettling political headlines weighs on consumer confidence.

The slowdown has put the Bank’s decision in August to raise its key refinancing rate to 0.75% in an unflattering light.

Data on Tuesday showed that companies in Britain are cutting jobs for the first time in six years as the economy stalls. The IHS Markit/CIPS UK Services Purchasing Managers’ Index, fell to 50.1 in January from 51.2 in December, which was its lowest level since July 2016.

Construction and services PMIs also fell in January, IHS/Markit said.

Inflation has also retreated in line with the drop in oil prices at the end of last year. From a peak of 3.1% at the end of 2017, it stood at only 2.1% in December.

“The economic outlook will continue to depend significantly on the nature of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond,” the BoE stressed in its press release.

However, the base case scenario in the Bank's quarterly inflation report, also published Thursday, assumed that the current slowdown is likely to be only temporary. The Bank said:

Under the assumptions conditioning the February Inflation Report, a period of softer growth domestically and in
the rest of the world was likely to prove only temporary and, in the U.K., excess demand was expected to build
over the second half of the forecast period. As a result, CPI inflation was expected to settle at a rate a little
above the 2% target in the medium term, following a temporary period of slightly below-target inflation over
coming months.

The Bank also repeated its conclusion from the previous statement that : “The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.”

Prime Minister Theresa May is trying to convince EU leaders to renegotiate a key part of the withdrawal agreement, but the bloc has signalled it won't reopen a deal that took two years to negotiate.

May faces strong opposition from her Conservative Party, who want reassurance that the so-called ‘Irish backstop’ arrangements won’t leave the country effectively under EU laws in the long term.

The Bank’s messaging comes as both the Federal Reserve and the European Central Bank adopt a more cautious tone about the global economic outlook. The Fed signaled in January that it would pause its tightening of monetary policy, while the ECB expressed fears of downside risks to the economy amid weak data from Germany and fears of a recession in Italy.

Bank of England Leaves Rates Unchanged Ahead of Brexit Deadline

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email