Bank of England stands pat, says Brexit uncertainty driving sterling down

The Bank of England held rates again, as expected. The benchmark rate is still stuck at 0.5 per cent for 84 months now. The Bank’s £375 billion asset-purchase program, designed to stimulate economic growth, also remained unchanged.

All nine members of the Bank of England’s rate-setting monetary policy committee have again voted to keep interest rates at their historic lows as inflation remains weak and uncertainties mount over the prospects for the UK economy this year.

UK inflation crept higher to 0.3 per cent in January but is still way off the BoE’s 2 per cent target. The BoE has a single mandate to deliver price stability, defined by the government’s inflation target of 2 percent.

The Consumer Prices Index remains far below this, rising by 0.3 percent in the year to January and 0.2 percent in the year to December 2015.

Meanwhile, the BoE also reiterated its view that the UK’s forthcoming vote on European Union membership could be destabilizing for the economy and financial markets. Governor Mark Carney recently noted to parliament that the forthcoming Brexit referendum seemed to be knocking the pound lower and leading to expectations of sharp moves in the British currency ahead.

Recently, Carney highlighted some benefits of the UK’s EU membership, but said the BoE would not comment on the long-term implications of an exit.

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