Bank of England: Interest decision for September 2018

Bank
of England Governor Mark Carney.
Hannelore Foerster/Getty

• The Bank of England leaves interest rates on hold at
  its September meeting.
• The bank raised rates at its previous meeting in
  August, so was always unlikely to change policy for a second
  consecutive month.
• Base rate of interest remains at 0.75%.
• The bank’s decision came just two days after it was
  announced that Governor Mark Carney has
  extended his stay at the helm of the central bank until early
  2020.

The Bank of England left interest rates on hold at the September
meeting of its Monetary Policy Committee (MPC), as had been
almost universally expected.

The central bank raised its base rate of interest from 0.5% to
0.75% last month and was always likely to leave rates unchanged
on Thursday. Any other outcome from the meeting would have been a
significant surprise to markets.

The nine-member MPC voted unanimously to leave rates on hold at
0.75%.

“With Brexit negotiations heating up, the BoE will more than
happy to drift into the background, having come under fire for
its views in the past,” Craig Erlam, a senior market analyst at
OANDA said in an email.

“With the outlook so uncertain and hanging on the outcome of
these negotiations, there’s little upside to the central bank
making any changes to its policy message between now and the end
of the year.”

The bank is widely expected to increase rates further in the
coming years, but the timing of such rate hikes remains unclear,
and the next move in rates will almost certainly not happen until
2019.

Minutes from the September meeting of the MPC said that: “Any
future increases in Bank Rate were likely to be at a gradual pace
and to a limited extent.” This was the same language used during
the August MPC meeting.

While it was always unlikely to move policy, the bank was
expected to provide an update on its planning for Brexit. It is
currently working on the assumption of an “orderly” Brexit, with
chief economist Andy Haldane saying last week that the bank sees
the prospect of a no deal Brexit at just 20%.

The bank said that it continues to base its projections on “a
smooth adjustment to the average of a range of possible outcomes
for the United Kingdom’s eventual trading relationship with the
European Union.” 

The bank’s meeting comes just two days after
it was announced that Governor Mark Carney has extended his stay
at the helm of the central bank until early 2020, having
previously been set to leave next summer.