Bank of England holds interest rates steady amid Brexit chaos

  • With just eight days to go before the country is set to leave the bloc, 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 BOE had expected this to be their final meeting before Brexit, but Prime Minister Theresa May has asked the EU for an extension to the deadline.
  • At around 12:40 p.m. London time, sterling traded down 0.4 percent at $1.3142.
Pedestrians walk past the Bank of England in the City of London, Britain June 28, 2016.
Paul Hackett | Getty Images
Pedestrians walk past the Bank of England in the City of London, Britain June 28, 2016.

The Bank of England (BOE) held interest rates steady on Thursday, amid intensifying uncertainty over Britain's departure date from the European Union.

With just eight days to go before the country is set to leave the bloc, 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 BOE had expected this to be their final meeting before Brexit, but Prime Minister Theresa May has asked the EU for an extension to the deadline. It means policymakers at the central bank have been left in limbo when it comes to implementing their plan for limited and gradual rate hikes over the coming months.

"The economic outlook will continue to depend significantly on the nature and timing of the EU withdrawal," the BOE said.

Businesses brace for no-deal scenario

The central bank also repeated that rates could move in either direction if there is a no-deal Brexit, with many fearful that the so-called "cliff-edge" scenario could hammer economic growth and jobs in the world's fifth-largest economy.

A disorderly exit from the EU on March 29 remains possible as May waits to formally hear from Brussels on her request to push back the U.K.'s departure from the bloc.

At around 12:40 p.m. London time, sterling traded down 0.4 percent at $1.3142.

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
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. 

Separately, the results of a BOE survey published Thursday found that approximately 80 percent of businesses feel they are somewhat prepared for a no-deal Brexit — up from 50 percent in January.

Almost 300 companies were interviewed in the survey, with many saying there were "limits to the degree of readiness" for a no-deal scenario.

"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.

Economic downturn

The BOE's rate decision comes after the U.S.Federal Reserve abandoned forecasts for any interest rate hikes this year amid signs of an economic downturn.

Market participants were buoyed by the Fed's dovish stance on Wednesday, but slowing global growth continues to weigh on investor confidence.

Last month, the BOE sharply downgraded its 2019 economic outlook to 1.2 percent. As recently as November, the Bank had projected growth of 1.7 percent this year.

It marked the biggest cut of its growth forecasts since the period immediately after the Brexit referendum in 2016. It also means policymakers at the central bank now expect Britain to grow at its slowest pace since the global financial crisis.

For 2020, overall economic growth is expected to slow to 1.5 percent, from 1.7 percent.