Bank of England holds interest rates

Published by Scott Challinor on January 31st 2020, 7:00am

The Bank of England has held interest rates at 0.75 per cent after Mark Carney’s final interest rate meeting as governor.

The Bank’s Monetary Policy Committee voted 7-2 in favour of keeping rates on hold at 0.75 per cent.

Following Boris Johnson’s election victory in December, policymakers foresee an improvement in the global backdrop but also a dissipation of longstanding uncertainty.

However, the MPC did concede that the persistent uncertainties surrounding Brexit had held back investment and stunted the UK's long-term growth prospects.

The MPC now believes that the UK's potential growth has been reduced to 1.1 per cent.

Addressing the media following the meeting, Carney said: "The most recent signs are that global growth has stabilised.

“To be clear these are still early days and it's less of a case of so far so good than so far good enough.

"Caution is warranted. Evidence of a pick-up in growth is not yet widespread.”

The MPC indicated that if a pick-up in business sentiment does not lead to stronger growth, then it is ready to cut rates if required.

The committee said: “Policy might need to reinforce the expected recovery in UK GDP growth, should the more positive signals from recent indicator of global and domestic activity not be sustained.”

The Bank’s projections for the economy show that there was no growth at all in the closing three months of 2019, which could drag overall economic growth down to just 0.75 per cent in 2020. The economy had been projected to grow 1.25 per cent over this year as recently as November 2019.

Forecast growth for the economy in the first three months of 2020 is 0.2 per cent.

Policymakers believe that an increase in government spending that is expected to be announced in the March Budget could fuel growth, while the global outlook is also set to improve after a US-China deal was agreed that will see some tariffs reduced.

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