The Bank said its panel of rate-setters voted 7 to 1 to hold rates at their current record lows at its May meeting, as it revealed a fall in growth expectations.
Kristin Forbes was the only panel member to vote for an immediate 25bps rate hike, but the overwhelming reaction to the decision from managers and economists was that the bank is in “no hurry” to change tack.
Governor Mark Carney warned the bank’s policy was dependent on a “smooth” transition in the Brexit process.
Aberdeen Asset Management’s chief economist Lucy O’Carroll said the uncertainty surrounding Brexit meant the bank’s relatively positive forecasts were frail.
She said: “The Bank of England is stuck between a rock and hard place. It must base its forecasts on a view of the Brexit deal but, with so little to go on at present, it’s not an easy judgement.
“So far, the Bank is sticking to its assumption that Brexit will be smooth – a deal will be reached and there will be a transition period from 2019. To say that is far from certain is a huge understatement.
“Governor Carney acknowledges the risks, but the weight of uncertainty – and therefore frailty of the forecasts – does undermine the Bank’s relatively positive message.”
John McNeill, fixed income investment manager at Kames Capital, was more downbeat on the risks to the economy than Carney.
