Interest rates are kept on hold as Brexit household squeeze begins

THE BANK of England kept interest rates on hold at 0.25 per cent yesterday as Governor Mark Carney warned the squeeze on households has begun as Brexitfuelled inflation outstrips wage growth.

The decision agreed with the judgment of the Shadow Monetary Policy Committee, a partnership between The Yorkshire

Post and Lupton Fawcett.

In light of the upcoming General Election the Shadow MPC voted unanimously to hold interest rates and against any further quantitative easing, although a number of members thought the current rate unsustainable in the long term.

Bill Adams, Yorkshire regional secretary for the TUC, said: “I would like to see some wage growth in the economy to increase people’s spending; it might cause some inflation but I don’t think that will do us any harm. I’m all for sitting tight until we see some wage growth.” Kevin O’Connor from RSM added: “Last time I voted for an increase in rates. “Now the Brexit negotiation is about to start is it the right time for it to go up? I don’t think so, certainly in the runup to the General Election.” Asked whether they would vote to increase interest rates after the General Election, assuming no major changes in the make-up of the Government, the of Shadow MPC members indicated that they would seek an increase, by a majority of one.

As the Bank of England confirmed its decision to kee interest rates on hold yesterday it also nudged down its growth forecast to 1.9 per cent for 2017 from two per cent in February, cautioning that a “slowdown appeared to be in train” after a sharper-than-expected fall in consumer spending.

Growth slowed sharply to 0.3 per cent in the first three months of the year from 0.7 per cent in the previous three months.

The Bank said that while it expects first-quarter expansion to be revised higher to 0.4 per cent, the economy would likely continue at a “similarly moderate pace of growth in the second quarter and beyond”.

The pound fell on the growth cut, down 0.4 per cent at 1.29 US dollars and 0.4 per cent lower at 1.19 euros.