The Bank of England has once again maintained base rate at 0.75 per cent - but it is warning that the ongoing uncertainties surrounding a No Deal Brexit could see interest rates staying ultra-low or rising sooner than expected.
All nine members of the Bank’s Monetary Policy Committee voted yesterday to leave rates unchanged in the last meeting before the UK is due to leave the EU on October 31.
However, in minutes of the MPC’s deliberations released with the decision yesterday it was clear that while Britain may avoid falling into recession immediately, growth in the third quarter of 2019 is likely to be weaker than forecast.
The Bank said Brexit uncertainty has become more “entrenched” and is hampering growth, with additional pressure exerted by the possibility of an Autumn or Winter General Election.
The Bank’s statement says: “Political events could lead to a further period of entrenched uncertainty about the nature of and the transition to the UK’s eventual future trading relationship with the EU. The longer those uncertainties persisted, particularly in an environment of weaker global growth, the more likely it was that demand growth would remain below potential, increasing excess supply.”
Rates could go in “either direction” in a no-deal Brexit, suggested the Bank, as it balances rising inflation caused by the pound with falling growth.
However, it did offer reassurance that “gradual and limited” rate increases would be the likely outcome of leaving with a deal.