Looking at the 'bigger picture'
London (AFP) - The Bank of England has left its main interest rate at 0.75 percent, it said Thursday after a regular meeting and before next month’s UK general election to unlock Brexit.
The central bank also upgraded its UK growth forecast to 1.4 percent in 2019 but downgraded 2020 guidance to 1.2 percent.
The new forecasts, which assume that Britain leaves the European Union with a deal on January 31, contrasted with the Bank of England’s (BoE) prior predictions of 1.3 percent for both years.
The bank’s Monetary Policy Committee (MPC) voted 7-2 to hold borrowing costs, according to minutes of the rate-setting meeting that took place Wednesday.
“Two members preferred a 25 basis point cut in bank rate at this meeting,” the minutes read.
The pair judged that “some extra stimulus was needed now to ensure a sustained return of inflation to the target”.
The minutes meanwhile noted “downside risks to the MPC’s projections from a weaker world outlook and from more persistent Brexit uncertainties affecting corporate and household spending”.
They added: “For the majority of members of the committee, the existing stance of monetary policy was appropriate at this meeting.
“Although the global outlook had deteriorated further, recent UK economic data had not, on the whole, surprised to the downside.”
Outgoing BoE governor Mark Carney, partaking in his penultimate rate decision, warned over the gloomy global outlook.
“At a time when news about the political and economic outlook seems to move hourly, it’s important to step back and look at the bigger picture,” Carney told a press conference.
“Globally, that big picture has darkened,” said the Canadian, who steps down at the end of January having extended his tenure twice owing to Brexit turmoil.
His successor has yet to be announced.
The BoE’s main task is use interest rates as a tool to keep 12-month UK inflation close to a government-set target of 2.0 percent.
The inflation rate held at a three-year low of 1.7 percent in September.
Earlier Thursday, Britain’s Conservative government cancelled a planned release of its own updated economic forecasts just one hour before publication had been due.
“This will no longer go ahead as the Cabinet Secretary has concluded that this would not be consistent with the Cabinet Office’s general election guidance,” the Office for Budget Responsibility said in a statement.
The Conservatives and the main opposition Labour Party on Thursday each promised billions of pounds of investment for hospitals, schools and infrastructure as they seek to woo austerity-weary voters ahead of the December 12 vote.
Prime Minister Boris Johnson’s Conservatives confirmed an end to a decade of belt-tightening with new plans to borrow to invest, while attacking the rival Labour party for pledging even greater largesse.