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Bank of England’s Monetary Policy Committee voted unanimously to leave Bank Rate at 0.5% and the size of the asset purchase facility at £375bn. Bank of England finally decided to express a view on Brexit. The BoE acknowledge that the Brexit vote has weighed on sterling and may “also delay some spending decisions and depress growth of aggregate demand in the near term.
The Bank highlighted how uncertainty regarding the June vote on the UK’s membership of the EU is exacerbating wider concerns about the domestic and global economic outlook. Bank of England minutes released today show policymakers see rates rising more gradually and to a lower level than previous cycles.
Policy makers noted that significant proportion of recent GBP decline reflects concern over Brexit. Despite Jan rise, inflation remains well below 2% target. MPC will continue to monitor influence of Brexit debate on sterling asset prices and will remain watchful for signs that low inflation becoming more persistent.
"Given the underlying strength of the economy and rising medium term inflation pressures we still think a November rate hike is possible. However, should the UK vote to leave the next move is likely to be a rate cut as policy makers try to shore-up confidence.” notes ING Research in a note to clients.
