Saying economic uncertainty around Britain’s divorce from the European Union is mounting, the Bank of England announced Wednesday that it is keeping interest rates unchanged.
The British central bank’s Monetary Policy Committee, led by Governor Mark Carney, voted 9-0 to hold its benchmark interest rate at 0.75%. All but one of the 61 economists in a Bloomberg survey correctly predicted Thursday’s decision.
"The broader economic outlook will continue to depend significantly on the nature of EU withdrawal," the minutes of the meeting said. "The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction."
The Bank of England is also dealing with how to reverse years of loose monetary policy alongside the rest of the world’s central banks. The U.S. Federal Reserve on Wednesday lifted borrowing costs while cutting its outlook for more interest rate increases next year. The Bank of Japan kept its policy unchanged on Thursday, while Sweden raised its benchmark interest rate for the first time since 2011.
British policymakers said they now see inflation slowing below the 2% target as soon as January after oil prices fell. Nevertheless, stronger-than-anticipated wage growth and weak productivity suggest that underlying inflation pressures are building in the United Kingdom.
The economic outlook has weakened since the British central bank’s last round of forecasts in November. While growth was 0.6% in the third quarter, the Bank of England expects 0.2% expansion at the end of the year and about the same in the first three months of 2019.
