Bank of England holds rates

The MPC voted 9-0 to leave rates unchanged at 0.75 per cent, its highest level since March 2009, following August’s increase of a quarter of a percentage point.

It is expected that they will be no further rate rise until after Britain leaves the European Union in March 2019.

The MPC said there had been indications of “greater uncertainty” in the process of withdrawing from the EU since its last meeting.

The Bank’s regional staff reported that businesses were cracking down on costs and holding back on investment ahead of Brexit, which is due at the end of March.

However, the Bank has raised its forecast for UK economic growth in the third quarter from 0.4 per cent to 0.5 per cent, partly due to stronger consumer spending over the unusually warm summer.

Howard Archer, chief economic advisor to the EY ITEM Club said: “In the Committee’s view, recent economic developments left the projections made in the recent Inflation Report broadly on track, although strength in activity over the summer resulted in an upgrade to forecast GDP growth in Q3 from 0.4 per cent to 0.5 per cent. There was also a touch more bullishness on pay growth, reflecting recent developments in the hard data and survey evidence. But the view that little slack remained in the economy and that forecast growth over the next few years was likely to exceed the economy’s ‘speed-limit’ remained unchanged.

“But assuming that a hard Brexit is dodged, the outcome of September’s meeting does nothing to change our view that monetary policy is set for a long period of inaction. Declining inflation, sluggish GDP growth and Brexit uncertainty is likely to stay the MPC’s hand from another hike in the Bank Rate until well into next year.”