The Bank of England has defied
predictions by keeping interest rates on
hold once more, but signalled action next
month to boost the economy after the
Brexit vote.
Minutes of the decision by the Monetary
Policy Committee (MPC) showed
members voted 8-1 to leave rates at the
all-time low of 0.5%, where they have
been since March 2009.
Investors and economists were taken by
surprise, having expected the Bank to cut
rates to 0.25% after Governor Mark
Carney said last month his view was that
action would be taken over the summer.
The pound jumped more than 1% against
the US dollar and euro after the no-
change decision, while the FTSE 100
Index briefly slipped into the red before
regaining its poise.
But the minutes suggested a rate cut may
come next month, revealing that “most
members of the Committee expected
monetary policy to be loosened in
They will wait until the Bank’s quarterly
forecasts on August 4 before taking
further action and deciding on “various
possible packages of measures”.
Economist Paul Diggle, of Aberdeen Asset
Management, said: “The Bank of England
has decided that patience is a virtue.
“But the next meeting is only three weeks
away, and by then Carney and his
colleagues will have a few extra post-
referendum data points to digest as well
as a new set of forecasts.”
One MPC member, Gertjan Vlieghe, voted
for an immediate cut to 0.25% amid signs
that the EU referendum decision was
already hitting parts of the economy, with
growth set to come under further
The decision to hold rates suggests the
Bank is far from having to take
emergency action to shore up the
economy, although the minutes do reveal
worrying signs.
Fears of a hit to house prices were
confirmed, with the Bank warning a
preview of the June survey from the Royal
Institution of Chartered Surveyors showed
a “marked weakening” in activity and
Separate figures also showed plunging
business and consumer confidence.
The Bank cautioned the “uncertainty
flowing from the referendum result was
likely to be negative for near-term
But the minutes of the MPC meeting
showed the economy had been resilient in
the run-up to the vote, with the Bank now
expecting second-quarter growth to pick
up to around 0.5%, from 0.4% in the
previous three months.