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| Bank of England keeps interest rates on hold | Bank of England keeps interest rates on hold |
| (30 minutes later) | |
| The Bank of England has kept interest rates on hold at 0.75% but indicated it may have to cut interest rates if global economic growth fails to recover or if Brexit uncertainties persist. | The Bank of England has kept interest rates on hold at 0.75% but indicated it may have to cut interest rates if global economic growth fails to recover or if Brexit uncertainties persist. |
| It said the UK economy was expected to pick up from its current weakness. | It said the UK economy was expected to pick up from its current weakness. |
| However, the Bank said it would monitor companies' and households' reactions to Brexit as well as global growth. | However, the Bank said it would monitor companies' and households' reactions to Brexit as well as global growth. |
| The Bank's Monetary Policy Committee (MPC) voted 7-2 in favour of keeping the official rate on hold. | |
| "If global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in GDP growth and inflation," the committee said in a statement. | |
| Growth of 0.3% in economic activity measured by gross domestic product (GDP) in the third quarter was "a little weaker" than the MPC expected at its November meeting, when members also voted 7-2 to keep rates on hold. | |
| "Household consumption has continued to grow steadily, but business investment and export orders have remained weak," it said. | |
| The Bank's analysis predicted growth of 0.1% in the fourth quarter - again, a weaker outlook than in its last meeting in November. | |
| It now expects inflation to subside to 1.25% in the spring. | |
| That largely reflected weakness in the construction sector, which has been contracting. | |
| The Bank's agents around the UK, who monitor activity, gave the construction sector its lowest score in 6.5 years. | |
| The agents also highlighted falling manufacturing exports, with the automotive sector suffering one of the biggest declines. | |
| 'Pressure' | |
| The weak economy meant companies were unable to pass on higher costs in full to their customers even as their costs rose, squeezing profit margins. | |
| "All sectors were affected, but margins were most squeezed in construction and consumer facing sectors," the MPC said. | |
| "For the latter, the pressure on margins was exacerbated by the shift towards online trading, higher business rates and the impact of increases in the National Living Wage on pay." | |
| That was one factor adding to weak investment. "Investment intentions remain depressed by slower global growth and political uncertainty." | |
| However, the MPC also said that if global growth did stabilise and Brexit uncertainties did not persist then the next move in interest rates may be up. | |
| "Further ahead, provided these risks do not materialise and the economy recovers broadly in line with the MPC's latest projections, some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the target." |