Interest rate set to stay unchanged as Brexit fears continue

WEEK AHEAD

BANK of England policymakers are set to keep interest rates on hold at 0.75% this week after recent turmoil in Westminster and as Brexit uncertainty reigns.

The last rates decision of 2018 comes as prospects of a Brexit deal remain highly uncertain, with the economy showing signs of stagnating as businesses, consumers and homebuyers put big spending decisions on hold.

Members of the Bank’s nine-strong Monetary Policy Committee appear to be staying firmly in waitand-see mode, with the outlook clouded by worries over a no-deal EU exit.

Just weeks ago, the Bank warned in its Brexit scenario analysis the UK could be tipped into a recession worse than the financial crisis in the event of a no-deal disorderly Brexit.

Investec economist George Brown said: “Given the prevailing Brexit uncertainty, we expect policymakers

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TODAY:

TOMORROW:

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WEDNESDAY:

to refrain from altering any aspects of its monetary policy toolkit.”

But he said the Bank may look to “keep some coals in (Contractors), 2.21p.

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FRIDAY:

the fire for a February hike” as inflation pressures build and amid the potential for an economic boost once there is clarity over a deal. 1.6275p; Jpmorgan Japanese Investment Trust, 5p; Keystone Investment Trust, 39.75p; LXI REIT, 1.375p.

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He said: “We expect the minutes of the November meeting to signal that a rate hike is ‘live’ for February.”

“The MPC may judge it necessary to insert stronger rate guidance to lift investors’ Brexit blinkers,” he added.

But he stressed the MPC may choose to push back any further increases if an orderly Brexit is still not assured by its next meeting.

The latest economic indicators show the toll Brexit is already taking, with gross domestic product (GDP) easing sharply to 0.4% in the three months to October, against 0.6% in the third quarter.

November’s purchasing managers’ index reading also signalled the weakest expansion in the dominant services sector for two-anda-half years.

However, this pales in comparison to the effects a cliff-edge Brexit would have on the economy, according to the Bank’s recent doomsday no-deal analysis.

Meanwhile, official figures being released on Wednesday are set to show the rate of Consumer Prices Index inflation falling to 2.3% in November from 2.4% on October.