The Bank of England said the uncertainty around Britain’s divorce from the European Union was intensifying as it kept interest rates unchanged.
The Monetary Policy Committee, led by Governor Mark Carney, voted 9-0 to hold the benchmark at 0.75 percent. All but one of the 61 economists in a Bloomberg survey correctly predicted Thursday’s decision.
“The broader economic outlook will continue to depend significantly on the nature of EU withdrawal,” the minutes of the meeting said. “The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.”
The pound was little changed at $1.2610 as of 12:03 p.m. in London.
The BOE is also grappling with how to exit years of ultra-loose policy alongside the rest of the world’s biggest central banks. The Federal Reserve on Wednesday lifted borrowing costs while cutting the outlook for more hikes next year. The Bank of Japan kept its policy unchanged on Thursday. Sweden raised its benchmark for the first time since 2011.
Inflation Outlook
U.K. policy makers said they now see inflation slowing below the 2 percent target as soon as January after oil prices fell. Nevertheless, stronger-than-anticipated wage growth and weak productivity suggest that underlying inflation pressures are building.
The economic outlook has weakened since the bank’s last round of forecasts in November. While growth was 0.6 percent in the third quarter, the BOE expects 0.2 percent expansion at the end of the year and about the same in the first three months of 2019.
The government’s latest budget, unveiled in November, will probably add about 0.3 percent to U.K. GDP in the longer term, the minutes said.
If Brexit goes smoothly, policy makers said last month that limited and gradual rate increases will be needed over the next few years to keep inflation in check. But turmoil since then puts that assessment in doubt.