Mubasher: The Bank of England surprisingly decided to hold its key interest rates steady, unlike all speculations about the first cut in more than seven years after Britons voted for a divorce from the European Union (Brexit).
The Bank’s Monetary Policy Committee unanimously voted 8 to 1 to keep its benchmark interest rate unchanged at 0.5%, wrong-footing many analysts who expected a 0.25% cut.
According to the committee’s minutes, the bank by this decision tried to shrug off the Brexit’s impact on the economy rather than to enlarge it.
“The overall resilience of the U.K. financial system, and the flexibility of the regulatory framework, had allowed the impact of the referendum result to be dampened rather than amplified”, the minutes revealed.
The Brexit decision has battered the growth outlook for Britain as everything becomes in mess amid pressures forcing the country to reassess its relationship with the whole European continent and its economic future, which all in all opens a greater space for the state of uncertainty to continue as an encumbrance on the economy. Therefore, Mark J. Carney, the governor of the Bank of England said two weeks ago “the economic outlook has deteriorated.”
Hence, the committee saw “appropriate to leave the stance of monetary policy unchanged at this meeting”. But it expected its “monetary policy to be loosened in August”, according to the committee’s minutes.
In August as well, the bank is likely to uncover its updated forecast for inflation which is necessary for measuring the precise size and nature for any stimulatory measures.
