Bank holds rates but rings alarm bell over investment levels
Bank of England policymakers have voted unanimously to hold interest rates at 0.75 per cent but warned that a short Brexit delay could see business investment pull back even further until a deal is secured.
In yesterday’s minutes of the latest rate decision, the central bank noted that a short delay may see a “larger immediate reduction” in business investment, while firms sit tight and wait for a resolution on the Withdrawal Agreement.
A longer delay may see less of an impact as firms “judge it too costly to wait for any resolution to become apparent”, according to the Bank.
“There was also the possibility of further cliff-edge uncertainties that could have a significant effect on spending as any new deadline approached,” it warned.
But there was some cheer for the economy as the Bank noted a “modest” rebound in consumer spending that is helping to offset the ongoing pressure from falling business investment.
The Bank is widely expected to hold rates for some time until greater clarity over the EU withdrawal deal emerges.
Howard Archer, chief economic advisor to the EY Item Club, said: “It was always inconceivable that with Brexit uncertainties at a peak, there would be any other outcome than a unanimous 9-0 monetary policy committee (MPC) vote for unchanged Bank of England interest rates.
“The MPC remains locked in ‘wait and see’ mode.” 0 Howard Archer – MPC now locked in ‘wait and see’ mode