Bank of England to hold rates as Brexit delay renews uncertainty
Bank of England policymakers are set to hold rates firmly at 0.75% next week as the “fog” of Brexit continues after the six-month EU departure delay.
The Bank’s latest rates decision – which will be accompanied by its quarterly Inflation Report forecasts – comes amid signs that Brexit stockpiling has boosted recent economic growth figures.
Data suggests the economy may have expanded by 0.4% in the first quarter, up from 0.2% in the final three months of 2018.
But this was largely due to “no deal” precautionary stockbuilding ahead of the original March 29 Brexit deadline and relatively mild weather, which experts believe will unwind in the April to June quarter.
Until the “fog” of Brexit – as Bank governor Mark Carney put it earlier this year – is lifted, policymakers are seen as remaining in wait-and-see mode for some time yet.
Investec economist Philip Shaw said: “The committee as a whole is likely to remain fretful over downside risks to the economic outlook.”
He added: “The committee’s immediate concerns over a disorderly Brexit could be eased somewhat by the new 31 October exit date.
“However its worries over the global economic background seem set to remain.
“Indeed it is probably this latter point which is likely to provide the main argument for keeping rates steady this time.”
But economists are increasingly expecting pressure building for the MPC to consider raising rates later in 2019.
Investec believes one member – Michael Saunders – may vote for a hike on Thursday.
The Bank is expected to nudge its 2019 growth forecasts higher in the accompanying inflation report, up from the 1.2% predicted in February thanks to the stockpile-boosted first quarter.
It may also up its inflation outlook due to energy prices, despite the Consumer Prices Index remaining steady at 1.9% in March.
“The MPC will find a case for higher rates increasingly compelling as the year draws on,” said Mr Shaw.
He is pencilling in a hike to 1% in November, although this is based on a Brexit deal being reached.
The Bank’s rates announcement also comes after the Treasury announced it had kicked off the hunt to find a replacement for Mr Carney.
It is using a headhunter for the first time to search for his successor ahead of his departure next January.