June 20, 2019
The Bank of England has announced that it will be holding interest rates at 0.75% today, and lowered its growth forecast for the second quarter of 2019 to zero.
In a statement, the central bank blamed uncertainty around Brexit, global trade tensions and the unwinding of Brexit-related stockpiling by businesses as reasons for the decision.
Despite the central bank’s claim that interest rate rises could be more frequent than expected if the economy performs as forecast in May, the decision came as little surprise following this week’s news that inflation has fallen to the Bank of England’s target of 2%.
Reacting to the news, Stuart Law, CEO at Assetz Capital, said: “It is unsurprising that the Bank of England has left interest rates unchanged, given the lack of a solid base for the claim that it would increase rates in the first place. The Bank made similar noises last year before making a U-turn when inflation dropped in January, and has done the same thing in similar circumstances this time around.
“It is unlikely that we will see any increase in the rates until the economic consequences of whatever form of Brexit we eventually see or don’t see are felt. For now, the temporary boost provided by businesses stockpiling for Brexit needs to unwind, which will only supress growth. At the same time, the rest of the world loosening economic policy effectively tightens ours, again making rises unlikely.
“Even if the Bank of England does increase interest rates at some point, it won’t help bank and building society savers much as base rate rises are seldom fully passed on, unlike borrowing costs to borrowers where base rates are nearly always passed on.
“Ensuring that SMEs and property developers can easily access important growth capital should be prioritised as a sustainable way to drive economic growth in the current climate, something that we continue to deliver as we approach £1bn lent to UK businesses to date.”