Bank holds rate steady at 0.75% amid Brexit chaos

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The BoE chose to keep its main interest rate at 0.75% following a meeting at which policymakers discussed "the possibility of further cliff-edge uncertainties that could have a significant effect on spending as any new deadline approached" for Brexit.

Policymakers at the British central bank, the Bank of England (BOE), on Thursday held the bank interest rate unchanged at 0.75 percent.

The Bank said that the economic outlook of the United Kingdom depends significantly "on the nature" of the country's European Union withdrawal, particularly the type of trade arrangements between the European Union and the United Kingdom, whether the transition to them will be abrupt or smooth, and how businesses, markets, and households will respond.

"Many of those companies had also reported that there were limits to the degree of readiness that was feasible in the face of the range of possible outcomes".

"Indeed, the March survey also showed that respondents - even those that felt "ready" - still expected output, employment and investment over the next 12 months to be significantly weaker under a "no deal, no transition" Brexit", the BOE said.

"At its meeting ending on 20 March 2019, the [Monetary Policy Committee] MPC voted unanimously to maintain Bank Rate at 0.75%", the bank said in a press release.

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It also warned the increasing external risks in the report and said that the broad-based softening in global GDP and trade growth has continued. Upbeat economic figures support a rate hike, perhaps in August.

The Bank warned that Brexit uncertainty has hit confidence and business investment. Most economists believe that the British central bank will not raise interest rates this year.

The BOE said mounting inflationary pressure and a healthy labor market mean it expects to gently raise interest rates over the next two to three years if Britain's European Union exit goes smoothly.

Some members of the MPC, including governor Mark Carney, have said that they would probably vote to cut rates if Britain leaves without a deal.

Inflation in Britain is running just below the BOE's 2 per cent target but pay growth is running at its highest level in more than 10 years.

"The desire to gradually normalise interest rates from their low levels is already complicated by improved wage growth on one side and weakening economic growth on the other, notwithstanding calculations over the Brexit process", he added. The BOE said that signs of strength in inflation pressure in the labour market were "notable".

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