The Bank of England kept interest rates steady on Thursday 30/1/2020, saying signs that Britain’s economy had picked up since December’s election, and a more stable global economy, meant more stimulus was not needed now.
Financial markets had seen a 50% chance of a cut, but the Monetary Policy Committee split once again 7-2 in favour of keeping Bank Rate at 0.75%.
Bank of England governor Mark Carney speaks of ‘modest’ economic forecast after the bank surprised many investors by leaving interest rates unchanged at 0.75% in its latest monetary policy decision.
The central bank kept the door open for a move after Governor Mark Carney hands over to his successor, Andrew Bailey, in March.
“Policy may need to reinforce the expected recovery in UK GDP growth should the more positive signals from recent indicators of global and domestic activity not be sustained or should indicators of domestic prices remain relatively weak,” the BoE said in its quarterly Monetary Policy Report.
But if growth picked up as suggested by upbeat business surveys since Prime Minister Boris Johnson’s unexpectedly emphatic Dec. 12 election win, “some modest tightening” of policy might be needed further ahead, the BoE said.
The central bank no longer specified that such tightening would be “limited and gradual”, a long-standing piece of BoE guidance that dated back to a time when a more rapid pace of interest rate increases might have looked likely.
The central bank estimated Britain’s economy did not grow at all in the final three months of 2019, a time of political uncertainty when parliament forced a delay to Brexit and a snap election raised the prospect of a change in government.
This will have a knock-on effect on economic growth for 2020, which the BoE forecasts will be just 0.8% for the year as a whole, the slowest since the financial crisis.
Growth is seen recovering over the year, however, reaching an annual rate of 1.2% by the final quarter of 2020.