In the Bank of England statement this noon, Mark Carney announced that the interest rates will remain unchanged.
This contrasts earlier speculations he may lower rates to 0.25% in the first reduction in over seven years.
The vote to leave interest rates at 0.5% came with an 8 to 1 decision by the MPC. While the committee did agree that the country’s economic performance and outlook post Brexit is likely to warrant a stimulus in the future, only Gertjan Vlieghe, a former hedge fund economist, thought an immediate stimulus was necessary. The rest of the committee agreed with Governor Mark Carney to leave interest rates unchanged until more data is collected and revise the decision next month.
The decision not to lower interest rates comes as a surprise and disappointment to many in the financial markets. It was considered that possible post-Brexit recessionary pressures will have to be addressed with stimulating monetary measures.
In the immediate aftermath of the decision, the pound jumped 200 points. The FTSE100 fell by over 70 points.
Further, the MPC unanimously voted to leave its’ quantitative easing program of £375bn. unchanged. The decision further reflects the current view to wait on more data and hold off on the implementation of new stimulating measures until at least next month.
The decisions on how to proceed next month will also be largely influenced by the next inflation report. The next report will become public at noon on the 4th August.
For a more detailed report on the meeting view the Bank of England’s Monetary Policy Summary and minutes of the Monetary Policy Committee meeting.