The Bank’s Monetary Policy Committee unanimously voted to hold interest rates at 0.75 percent, dealing a blow to savers desperate for an increase after years of low returns. Mortgage holders will welcome the reprieve, with payments unlikely to increase dramatically. The bank had been expected to raise rates once Britain exited the EU with a deal and transition period in place, but could be forced to ease policy instead in the event of a no-deal outcome.
A market-implied gauge of rate hikes from the Bank of England shows the possibility of a rate rise by December has dwindled to 18 percent, compared to 40 percent earlier this week.
The pound was broadly unchanged after the interest rates decision, but has been volatile over the last few days due to Brexit.
Theresa May is in Brussels today to ask EU leaders to support a request for a three-month delay to Brexit.
The Bank of England said most businesses felt as ready as they could be for a no-deal Brexit.
The news came a day after the US Federal Reserve also held their interest rates.
The US ruled out rising the base rate for the rest of the year as poor growth and unemployment figures weighed on the economy.
In minutes of the latest decision, the Bank warned that a short Brexit delay could see business investment pull back even further until a deal is secured.
A short delay may see a “larger immediate reduction”, while firms sit tight and wait for a resolution on the Withdrawal Agreement.
A longer delay, however, may see less of an impact as firms “judge it too costly to wait for any resolution to become apparent”, according to the Bank.
“There was also the possibility of further cliff-edge uncertainties that could have a significant effect on spending as any new deadline approached,” it warned.
The Bank is widely expected to hold rates for some time until greater clarity over the EU withdrawal deal emerges.
The Bank reiterated that its response to any no-deal scenario would not be automatic and that rates could go in “either direction”.
In a welcome sign that businesses are preparing themselves against any shock, the Bank said its latest survey suggested around 80% of firms judged themselves ready for a cliff-edge exit, up from just 50% in the January poll.
It added that there was further signs of stock-building, though this is not expected to have a large impact on gross domestic product (GDP).
But there was some cheer for the economy as the Bank noted a “modest” rebound in consumer spending that is helping to offset the ongoing pressure from falling business investment.
It improved its economic outlook slightly, forecasting growth to edge up to 0.3 percent in the first quarter of 2019, from 0.2 percent in the final three months of 2018, thanks to more robust household spending.
Britons appear to be shrugging off the Brexit worries, as official figures also out on Thursday showed a surprisingly healthy 0.4 percent rise in retail sales last month.
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