Bank of England leaves interest rates unchanged

The Bank of England (BoE) left its benchmark interest rate unchanged today, as it waits for more evidence of the negative impact of Brexit, despite noting the likelihood of a “significantly lower path for growth” [1].It is expected to introduce new stimulus on multiple fronts in August, as the economy stumbles from Britain’s decision to leave the European Union.

The BoE said in a statement: “The nine-member Monetary Policy Committee, led by Governor Mark Carney, voted 8-1 to keep the benchmark at 0.5 percent, with only Gertjan Vlieghe saying the outlook justified an immediate reduction” [2].

The committee members also restated their judgement that the vote “could lead to a significantly lower path for growth and a higher path for inflation than in the central projections set out in the May [inflation] report” [1].

Alan Clarke, economist at Scotiabank, said Mark Carney has shown himself to be an “unreliable boyfriend” to the markets [3].

The Monetary Committee further said that “the uncertainty flowing from the referendum was likely to depress economic activity in the near term”.

According to the meeting minutes, “most members of the [Monetary Policy] Committee expected monetary policy to be loosened in August”, with the committee considering “a range of possible stimulus measures” [1].

The pound spiked as the decision to keep the interest rate steady surprised investors; it’s up around 2% against the dollar to $1.336.

[1] – Bank of England holds rates despite Brexit concerns – Financial Times
[2] – Bank of England Signals August Stimulus as Rate Kept at 0.5% – Bloomberg
[3] – UK interest rates held at 0.5% – BBC News