BoE likely to keep rates on hold amid sluggish UK economic outlook

BoE likely to keep rates on hold amid sluggish UK economic outlook

Britain’s central bank will today announce the result of its third monetary policy review of the year, with most economists

bank-england-umbrella

Photo: Reuters/Alessia Pierdomenico

Britain’s central bank will today announce the result of its third monetary policy review of the year, with most economists suggesting no change is likely until at least August.

The last review in March increased speculation that the Bank of England would hike rates today. However, analysts now expect the rate remaining at 0.5% due to the sluggish 0.1% first quarter economic growth figures released in late April. Increasing interest rates risks a dive in economic growth as it would increase the cost of borrowing for individuals and businesses at a time when investment is needed.

Today’s announcement comes amid economic uncertainty over Brexit—currently under huge pressure in parliament. Consumer confidence dived in April to a five-year low. Inflation also fell to 2.5% in the 12 months to March as wage growth dropped to 1%. Given the delicate economic conditions, uncertainty over Brexit risks businesses decreasing investment or downsizing leading to stagnation in the economy if growth falls below 0.1%.

Expect an interest rate hold to the current 0.5% rate to try and bolster businesses investing in the economy to increase GDP growth.

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