Bank of England keeps interest rates on hold

The Bank of England has kept interest rates on hold at 0.75% but indicated it may cut the cost of borrowing if global economic growth fails to recover or Brexit uncertainties persist.

It said the UK economy was expected to pick up from its current weakness.

However, the Bank said it would monitor companies’ and households’ reactions to Brexit as well as global growth.

The Bank’s Monetary Policy Committee (MPC) voted 7-2 in favour of keeping the official rate on hold.

“If global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in GDP growth and inflation,” the committee said in a statement.

Economists were divided over the direction of rates.

Dean Turner, an economist at UBS Wealth Management, said: “After last week’s election result, the short-term clarity we have on Brexit could give a lift to economic sentiment, especially for businesses. A modest fiscal easing in the forthcoming budget could also push things along a little.

“Overall, though, as attention turns to the December 2020 end of transition deadline, the mood will likely remain subdued and growth weak. We expect that the committee will move further towards a rate cut in 2020 and a quarter point easing in May.”

But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “All told, we still think that interest rates are much more likely to rise next year than to fall.

“But as both the identity of the next [Bank of England] Governor and the willingness of the Prime Minister to sacrifice the economy to achieve Brexit by his timetable are unknown, the outlook for monetary policy remains exceptionally cloudy.”