On Thursday, the Bank of England announced it was keeping interest rates on hold at 0.75% despite continued slow global economic growth.
The Committee that sets monetary policy to meet the 2% inflation target voted by a majority of 7-2 to freeze the current interest rate.
In a statement it said: “UK GDP increased by 0.3% in 2019 Q3 and is expected to rise only marginallyin Q4. Household consumption has continued to grow steadily, but business investment and export orders have remained weak.
“There continue to be some signs that the labour market isloosening, although it remains tight.Employment growth has slowed and vacancies have fallen,but the unemployment rate has remained stableand the employment rate is around its record high. Although pay growth has eased somewhat, unit labour costs have continued to grow at rates above those consistent with meeting the inflation target in the medium term.
“The Committee will, among other factors, continue to monitor closely the responses of companies andhouseholds to Brexit developments as well as the prospects for a recovery in global growth. If global growth fails to stabiliseor if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth andinflation.”
Dr Kerstin Braun, President of Stenn Group, an international provider of trade finance head quartered in London, commented: “Boris Johnson’s win provides the much-needed solidity the UK has been craving. Businesses can begin to see their future and now Brexit is confirmed to go ahead, The Bank of England needs to keep the economy steady as we navigate Britain’s exit from the EU. But a prolonged period of low growth, low inflation, and low interest rates will limit the Bank’s ability to create stimulus when needed.
“It’s unlikely trade will be decided until the end of 2020 so it’s vital UK firms start investing again as they exit Brexit limbo. This is critical for long-term growth. With Europe mired in low growth and a modest global economic outlook for 2020, global demand will be weak as companies rev up their engines. The recovery will be slow, with GDP growth estimated to be 1% in 2020.
“The UK economy has been flatlining this year, but the pound surged to its largest amount in a decade after a clear majority was announced, and it’s expected Sterling could rally next year to a pre-referendum level of $1.45. We expect consumer spending to pick up gradually, but with elevated levels of household debt, the consumer can’t keep the economy afloat forever. Unemployment is down but wages aren’t keeping pace.”