Bank of England keeps interest rates at 0.75% after unanimous vote

The bank is not expected to raise rates until the economy is on firmer ground ( PA )

The Bank of England has kept UK interest rates at 0.75 per cent after a unanimous vote by the nine members of its monetary policy committee.

The bank also hiked its economic growth forecast to 1.5 per cent in 2019, 1.6 per cent in 2020 and 2.1 per cent in 2021. UK GDP has been boosted in the short term by a stockpiling drive by businesses prior to the original March Brexit deadline.

In the longer term, the UK outlook has been improved slightly by prospects for other nations’ economies. However, the bank is not expected to raise its benchmark interest rate until the British economy is on a firmer footing. 

The monetary policy committee said in the minutes to its rate-setting meeting: “GDP is expected to have grown by 0.5 per cent in the first quarter, in part a reflection of a larger-than-expected boost from companies in the United Kingdom and the European Union building stocks ahead of recent Brexit deadlines. That boost is expected to be temporary, however, and quarterly growth is expected to slow to around 0.2 per cent in the second quarter.”

Stock-building during the period had been higher than expected, with UK manufacturing output rising markedly during the first two months of 2019. Imports of goods from EU and non-EU countries both rose by around 3 per cent during the quarter. The pound was broadly flat after the rate announcement, which was in line with traders’ expectations.

Erik Norland, senior economist at CME Group, said: “Both the pound and UK interest rates are still stuck in a tug of war between a strong employment market and wage growth, which ordinarily would pull them higher, and a soft housing market, weak exports and falling consumer confidence, which are pulling in the opposite direction.  

“Mixed economic indicators, combined with the continuing uncertainty regarding Brexit, are keeping the BoE and markets on hold. That said, if parliament seals the deal to leave the European Union it will likely send the pound significantly higher and nudge interest rate expectations in the direction of further rate hikes later this year.”