Interest rate cut more likely due to Brexit uncertainty, says Bank

Bank of England leaves rates on hold but signals that could change in near future

Brexit uncertainty and the slowdown in global growth has weakened the economy and made an interest rate cut more likely, the Bank of England has said.

The central bank said interest rates would remain at 0.75% after a unanimous vote of the monetary policy committee (MPC) on Thursday, but it signalled that further Brexit uncertainty amid a US-China tariff war could warrant a rate cut in the near future.

Taking a tougher line on the impact of the UK’s decision to leave the EU than its previous analysis of the economy, the bank said it feared that Brexituncertainty was in danger of becoming entrenched, leading to a weaker outlook.

In the minutes of its September meeting, the MPC said delays to an agreement on the UK’s trading relationship with the EU would harm consumer and business confidence.

This trend would be made worse by the trade war between China and the US, which has had the effect of cutting the economic growth rates in both countries this year, the committee said.

There was a likelihood that global growth would remain weaker, reducing the UK’s exports and GDP growth in coming months. “In such an eventuality, domestically generated inflationary pressures would be reduced,” the MPC said.

The warning came as the Bank said volatile financial markets and the stop-start nature of talks with Brussels over the last year had made Britain’s economic path difficult to read. The Bank said its reaction to a no-deal Brexit would still need to be judged after the event and could lead to a cut or an increase in rates.