Bank of England maintains Bank Rate at 0.75% amidst ongoing Brexit uncertainty
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet a 2% inflation target, and in a way that helps to sustain growth and employment.
MD of Cascade Cash Management Ltd, Dr Emma Black, explains in real term what that means to the people of the region:
“All nine members of the MPC voted unanimously to maintain Bank Rate at 0.75% in minutes released following the end of its last meeting.
“Inflation projections from February 2019 were reported to be on track with a weaker near-term outlook that is expected to lead to a small margin of slack opening up during 2019. Thereafter, demand growth is forecast to exceed a “subdued pace of supply growth and excess demand built over the second half of the forecast period”.
“CPI inflation increased slightly to 1.9% in February, up from 1.8% in January 2019. The largest contributors were rising prices for food, alcohol and tobacco, and other variables across a range of recreational and cultural goods.
“The uncertainty surrounding Brexit has continued to cause volatility in asset prices with the data indicating a continued delay to business investments decisions, particularly in manufacturing. In addition, retail sales remain below a long-term average with a slowdown in the demand for furniture and household appliances. We are seeing a range of High Street retailers entering into difficulty as a result of this observed slowdown.
“In contrast, some firms, such as law practices, have been able to capitalise upon the provision of Brexit-related planning advice and have reported stronger activity as a result. Employment growth has been strong, but the Bank of England reported a softening in the outlook. Despite this softened outlook, the continued tightness in the labour market in the short-term has benefitted employment agencies, who have reported an ability to increase fees helping candidates during corporate restructurings and relocations to continental Europe.
“Most projections continue to be based upon a smooth adjustment to a post-Brexit scenario and the MPC reaffirmed that if this is the case, a tightening of monetary policy may be appropriate to return inflation to the long-term 2% target. The committee indicated that the outlook is dependent upon answers to key issues surrounding: a) the new trading arrangements between the European Union and the United Kingdom; b) whether the transition to them is abrupt or smooth; and c) how households, businesses and financial markets respond to them.”