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Bank of England warns Brexit uncertainty has 'intensified considerably'

Key Points
  • The Bank said Brexit uncertainty had "intensified considerably" over the last month, adding falling oil prices were likely to drag inflation below its 2 percent target soon.
  • The Bank said Brexit uncertainty had "intensified considerably" over the last month, adding falling oil prices were likely to drag inflation below its 2 percent target soon.
  • Sterling was trading up around 0.6 percent at $1.2681 on the news.
Mark Carney, governor of the Bank of England (BOE), gestures while speaking during the bank's quarterly inflation report news conference in the City of London, U.K., on Thursday, Aug. 2, 2018. 
Simon Dawson | Bloomberg | Getty Images

The Bank of England (BOE) held interest rates steady on Thursday, with the U.K.'s economic outlook highly uncertain less than 100 days before the country leaves the European Union.

As widely expected the BOE's nine-member Monetary Policy Committee (MPC), led by Mark Carney, unanimously voted to leave interest rates unchanged at 0.75 percent.

The central bank warned that Brexit uncertainty had "intensified considerably" over the last month, adding falling oil prices were likely to drag inflation below its 2 percent target soon.

Sterling was trading up around 0.6 percent at $1.2681 on the news.

The previous change in interest rates came in August earlier this year, when the Bank raised rates by a quarter of a percentage point to their highest level since March 2009.

Brexit

BOE policymakers revised their forecast for quarterly economic growth in the final three months of the year to 0.2 percent from 0.3 percent. They added the outlook for the first quarter of 2019 was likely to be similar.

"Brexit uncertainties have intensified considerably since the committee's last meeting," MPC members said in a summary of the December meeting.

"These uncertainties are weighing on financial markets."

The BOE also repeated its view that benchmark rates could move in either direction post-Brexit, depending on how it unfolds.

With 99 days to go until Britain is due to leave the EU on March 29, deep divisions in parliament have raised the chances of the world's fifth-largest economy abruptly leaving the bloc without a deal.

The heightened risk of a disorderly Brexit has also increased calls for a second referendum to break the deadlock.

Earlier this month, embattled Prime Minister Theresa May pulled a vote on her Brexit deal after admitting lawmakers would most likely vote against it.

May is now seeking "assurances" from EU leaders over the nature of the so-called Irish backstop post-Brexit.

The backstop plan is essentially a legally-binding insurance policy to ensure there is no hard border between Northern Ireland and the Republic of Ireland whatever the outcome of future trade talks between the U.K. and the EU.

Critics of the current deal say Britain could end up being trapping the country in a customs union with the EU indefinitely.

However, May has repeatedly insisted if her deal is rejected then the U.K. could be forced to leave with no-deal — an option big business leaders dread — or the whole Brexit process could be reversed altogether.

The prime minister has rescheduled a vote on her Brexit deal for the third week of January.