The Bank of England (BoE) has announced that interest rates will remain at 0.75%, warning that the economy is on course for its weakest year since the global financial crisis.
With just 50 days to go before the UK leaves the European Union, the BoE’s nine-member monetary policy committee (MPC) voted unanimously to leave interest rates on hold at 0.75%. The BoE has also cut its growth forecast from 1.7% to 1.2% – blaming a slowing global economy as well as Brexit.
Governor Mark Carney reiterated that the Bank’s central view is that in a form of soft Brexit, the economy will pick up, firms will hire and invest, wages will rise, inflation will rise too, and “we’ll move forwards”.
That’s the core expectation, and monetary policy is set accordingly. But at present, the economy has slowed – partly due to a weaker world, and a weaker Europe, but also due to Brexit uncertainty.
The Bank repeated a previous warning that there was no guarantee that interest rates would be cut in the event of a no-deal Brexit. It said: “The economic outlook will continue to depend significantly on the nature of EU withdrawal, in particular: the new trading arrangements between the EU and the UK; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond.”
Rachel Duffey, Chief Executive of PayPlan, said: “The message from the Bank of England today is again one of uncertainty. There are so many questions that still surround Brexit, and an uncertain future means that households and businesses across the UK are now taking actions to improve their financial capability in preparation for a variety of outcomes.”
“The positive point to take from the Bank of England’s message, that people shouldn’t expect a sharp move in interest rates in the near future, shows some stability and means that we’re likely to see maintained responsible banking and safe lending standards.”
Use our calculator to understand how much extra money you might need to find each month if interest rates rise: www.payplan.com/out_of_interest/