Bank of England keeps rates steady as it eyes post-election pick-up

LONDON (Reuters) – The Bank of England kept interest rates steady on Thursday, saying signs that Britain’s economy had picked up since December’s election and that the global economy had stabilised meant further stimulus was not needed now.

FILE PHOTO: A bird flies past The Bank of England in the City of London, Britain, December 12, 2017. REUTERS/Clodagh Kilcoyne/File Photo

Financial markets had seen a 50% chance of a cut, but the Monetary Policy Committee (MPC) split once again 7-2 in favour of keeping Bank Rate at 0.75% with external members Michael Saunders and Jonathan Haskel voting to lower rates.

Sterling jumped by around half a cent against the dollar on the news, though interest rate futures still pointed to the central bank cutting rates soon, probably in May after Governor Mark Carney hands over to his successor Andrew Bailey.

Carney pointed to encouraging signs for the economy in early 2020 but said the BoE was waiting to see if this would be borne out in hard economic data.

“To be clear, these are still early days, and it is less of a case of so far so good, than so far, good enough,” Carney said in comments to reporters following the decision.

Seema Shah, market strategist of fund manager Principal Global Investors, said Carney had seemingly deferred the next policy decision to Bailey.

“Unless economic activity data improves measurably over the coming months, reflecting proof of the so-called ‘Boris bounce’, and interest rate cut is likely to remain on the agenda for 2020,” Shah added.

In a policy statement, the central bank came up with downbeat economic growth forecasts, saying Brexit would weigh on growth from next year, and it kept the door open to lower rates if the recent signs of a pick-up prove to be illusory.

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