Bank of England holds rates as it awaits Brexit clarity
LONDON — The Bank of England kept its main interest rate unchanged at 0.75 per cent Thursday, its last scheduled interest rate decision before Britain is due to leave the European Union.
In a statement, the bank said all nine of its rate-setters voted to keep rates unchanged and warned that prolonged uncertainty over Britain’s departure from the European Union would further weigh on economic growth.
“Brexit-related developments are making U.K. economic data more volatile,” rate-setters said.
“It is possible that political events could lead to a further period of entrenched uncertainty about the nature of, and the transition to, the United Kingdom’s eventual future trading relationship with the European Union.”
In the second quarter of 2019, the British economy shrank by a quarterly rate of 0.2 per cent. Though the bank expects that to be made up in the third quarter of the year, rate-setters said underlying growth has slowed and “that a degree of excess supply appears to have opened up within companies” — a sign that firms are holding back from making any major decisions until they get clarity over Brexit.
Britain is scheduled to leave the EU on Oct. 31 and Britain’s new prime minister, Boris Johnson, has stated that he will take the country out on that date come what may. However, lawmakers have enacted a law that would compel Johnson to seek an extension to Britain’s departure date in the event no withdrawal agreement has been backed by Parliament. Johnson says he won’t do that, further stoking uncertainty over Brexit.
The next scheduled interest rate decision is Nov. 7, a week after the scheduled Brexit date.