Base rate held at 0.75%
Members of the Monetary Policy Committee voted unanimously to hold the base rate at 0.75%, after raising it from the lowly 0.5% in August.
The Committee noted that GDP growth averaged around 1.5% per year, having grown 0.4% in 2018 Q2 and 0.6% in the three months to July. But while CPI inflation remains above the 2% target (2.5% recorded in July), the labour market has continued to tighten.
The unemployment rate has fallen to 4% and regular pay growth has risen further to around 3% on a year earlier.
It added that the global economy still appears to be growing at above-trend rates, but it recognises that the economic outlook “could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal”.
“Since the Committee’s previous meeting, there have been indications, most prominently in financial markets, of greater uncertainty about future developments in the withdrawal process”, the minutes read.
Ben Brettell, senior economist at Hargreaves Lansdown, said there’s been little change in key economic indicators since the Bank’s August meeting, though there’s been a notable lengthening of the shadow cast by Brexit-related uncertainty in recent weeks.
He said: “Policymakers are firmly in ‘wait-and-see’ mode having raised rates last month, and will be reluctant to even consider another move until they have a clear idea of what Brexit will look like. Realistically May next year looks the first available opportunity to raise rates to 1%.
“The minutes reiterated the Bank’s ‘gradual and limited’ stance on interest rate rises, but the outcome of Brexit negotiations will be the key to whether it can deliver on that promise. Indeed it looks increasingly likely the Bank will have to update its economic forecasts – due in its November Inflation Report – with no clarity over the Brexit deal (or lack thereof).
“Thankfully a relatively benign environment of under-control inflation and positive, albeit anaemic, growth, should afford the Bank the luxury of leaving policy unchanged for an extended period.”