September 13, 2018 13.28PM / By Richard
Economics correspondent, The Guardian
The Bank of England has left interest rates unchanged and warned of the mounting risks to the British economy from a no-deal Brexit as firms put investments on hold.
The Bank’s nine-strong monetary policy committee (MPC) voted unanimously to keep rates on hold at 0.75%, although it suggested rate increases could be required if the economy continues to recover from the slowdown earlier this year.
Threadneedle Street had been expected to leave interest rates unchanged after raising the cost of borrowing last month to the highest level seen since the recession almost a decade ago.
Despite an improving picture for economic growth in recent weeks and stronger wage growth for British workers, the MPC warned there had been increasing signs of stress linked to Brexit since its last meeting a month ago.
The Bank’s regional network of agents found businesses had begun putting investment plans on hold or were diverting spending to other countries. Suggesting investment intentions for the year ahead had deteriorated, the Bank said “concern focused on the possibility of increased trade frictions with the EU after withdrawal”.
The MPC also noted rising levels of volatility in sterling, adding that there had been an “increase in perceived downside risks to the exchange rate” among City traders caused by the mounting likelihood of no deal.
This was the first meeting of the MPC since Mark Carney, the Bank’s governor, agreed to extend his tenure until January 2020 to help smooth the process of Brexit.
There had been weeks of speculation as to whether Carney, the former governor of Canada’s central bank who took the Bank of England job in 2013, would agree to an extension of his term given the uncertainty over Brexit.
On Thursday Carney attended a special meeting of the cabinet chaired by Theresa May and focused on how a no-deal Brexit could be handled.