The Bank of England has left interest rates on hold at 0.5{06aeb1921e0b802d2bd9c766bc98fb11cc6a46c2b0593ed9c88a0e29cf417a34} and suggested it would act “more cautiously” ahead of the EU referendum this June.
Officials on the Bank’s nine-member Monetary Policy Committee (MPC) voted collectively to leave rates unchanged, as well as its £375bn quantitative easing policy to inject stimulus into the economy.
Rates have remained on hold since the height of the financial crisis in 2009 as policy makers aimed to nurse the UK economy back to health. Rumour about the timing of a hike have grown as the economy repairs.
But minutes of the MPC’s latest meeting indicated that the impact of the coming EU referendum meant it would have to be more considerate about reacting to economic data in during the coming months.
The minutes indicated there were signs that uncertainty over the referendum was heading to company spending decisions and commercial property transactions being postponed pending the outcome of the vote, which could lead to weaker growth in the first half of 2016.
They added: “Referendum effects are likely to make macroeconomic and financial market indicators harder to interpret over the next few months, and the Committee is likely to react more cautiously to data news over this period than would normally be the case.”
The minutes reinforced an earlier warning by Bank governor Mark Carney about the risks of a UK exit from the European Union, saying such a decision “might result in an extended period of uncertainty about the economic outlook”.
Scott Bowman, UK economist at Capital Economics, said: “It appears that interest rates won’t be increasing for a while yet. However, a cut in rates does not appear to be on the cards either, despite market pricing implying this.”
The decision comes days after official figures showed inflation had risen to a 15-month high of 0.5{06aeb1921e0b802d2bd9c766bc98fb11cc6a46c2b0593ed9c88a0e29cf417a34} in March though it is staying well below the Bank’s 2{06aeb1921e0b802d2bd9c766bc98fb11cc6a46c2b0593ed9c88a0e29cf417a34} target.
Economists have pushed back expectations for an interest rate hike into next year in the midst of a darkening global economic picture.
Source: Sky news