The Bank of England left its key interest rate unchanged Thursday, as expected, opting to keep its powder dry until it has more clarity on how the U.K.'s departure from the European Union affects the economy.
The bank's Monetary Policy Committee, or MPC, voted unanimously to keep the bank rate at 0.75%, although it downgraded its base case assumptions for growth both this year and next, in a nod to what it called "more entrenched" uncertainties over Brexit that had hit business confidence and investment.
The BoE's decision came only a couple of hours after IHS Markit's monthly survey of the U.K. manufacturing sector found that activity was still contracting at the fastest rate since 2012.
“July saw the UK manufacturing sector suffocating under the choke-hold of slower global economic growth, political uncertainty and the unwinding of earlier Brexit stockpiling activity,” IHS Markit economist Rob Dobson said.
The decision left the pound unmoved at around $1.2110 against the dollar initially. Sterling had fallen to its lowest level since January 2017 earlier Thursday ahead of the Bank's decision and it has lost nearly 4% in the last month as the prospect of a 'Hard Brexit' has risen, a development that the bank nodded to in its statement.
In a speech last week, the bank's chief economist Andy Haldane had warned against moving interest rates ahead of the Brexit date.
“Monetary policymakers are often cast as one-club golfers. In the current conjuncture, the problem is more that the MPC does not know which of two quite different fairways it should be aiming at,” Haldane said in his speech.
“With the economic road ahead potentially forking, the case for holding rates until the road becomes clearer is strong.”
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