The Bank of England is keeping rates on hold but could act depending on how Brexit goes (Adrian DENNIS)
<p>London (AFP) – The Bank of England on Thursday froze interest rates at 0.75 percent before Brexit next month, but left the door open to a reduction in the event of fresh turmoil.</p><p>The Monetary Policy Committee (MPC) voted 7-2 to hold borrowing costs, according to minutes of the two-day December gathering, with policymakers Jonathan Haskel and Michael Saunders repeating their November call for a 0.5 percentage point cut.</p><p>Thursday’s decision was the first since British Prime Minister Boris Johnson’s election triumph one week ago, and comes ahead of Britain’s departure from the European Union on January 31 — when BoE Governor Mark Carney is also due to step down.</p><p>The premier, whose ruling Conservative Party won the biggest majority since the 1980s heyday of Margaret Thatcher, wants to embrace Brexit and kick-start growth in Britain’s stalling economy.</p><p>The BoE’s chief task is to keep British 12-month consumer price inflation close to a 2.0-percent target.</p><p>"Monetary policy could respond in either direction to changes in the economic outlook in order to ensure a sustainable return of inflation to the 2.0-percent target," the minutes read.</p><p>"The committee will, among other factors, continue to monitor closely the responses of companies and households to Brexit developments as well as the prospects for a recovery in global growth.</p><p>"If global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation."</p><p>In the absence of those risks and if the economic recovery strengthens as expected, the bank added it may need to tighten policy to keep inflation on target.</p><p>The MPC cautioned however that there was "no evidence yet" about whether economic uncertainty had diminished among Britain’s companies and households.</p><p>And it also acknowledged that there had been an easing in the long-running trade war between China and the United States.</p><p>"Global growth has shown tentative signs of stabilising and global financial conditions remain supportive," the minutes read.</p><p>"The partial de-escalation of the US-China trade war provides some additional support (since the November rate decision) although trade tensions remain elevated."</p><p></p><p>- Growth ‘to pick-up’ -</p><p></p><p>Britain’s economy had avoided recession in the third quarter but there are increasing signs of slowing activity heading into the New Year, according to the latest data.</p><p>The bank stressed Thursday that it expects the economy to gather pace, in line with its November forecast.</p><p>"UK GDP growth was projected to pick up from current below-potential rates, supported by the reduction of Brexit-related uncertainties, an easing of fiscal policy and a modest recovery in global growth," it said.</p><p>Gross domestic product grew 0.3 percent in the July-September period after a 0.2-percent contraction in the second quarter.</p><p>Ahead of Thursday’s decision, the BoE had launched a probe after discovering some investors eavesdropped on press briefings moments before they were broadcast, reportedly to hand a split-second advantage to high-speed traders.</p><p>The Times newspaper had reported that one of the BoE’s suppliers had been sending a market-sensitive audio feed of the bank’s press conferences to hedge funds moments before the rest of the world.</p><p>The BoE has identified the feed that had been misused by a third-party supplier — whose access had now been revoked.</p><p></p>

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.