LONDON (Reuters) – Two Bank of England officials unexpectedly voted to lower interest rates on Thursday to ward off an economic slowdown, and others including Governor Mark Carney said they would consider a cut if global and Brexit headwinds do not ease.
FILE PHOTO: Bank of England Governor Mark Carney attends a Bank of England news conference, in the City of London, Britain November 1, 2018. Kirsty O’Connor/Pool via REUTERS//File Photo
Economists polled by Reuters had expected the BoE to vote unanimously to keep Bank Rate at 0.75%, and the announcement of the 7-2 split pushed sterling to a two-week low as market odds on a cut next year rose as high as 80%.
To date, the BoE has resisted following the U.S. Federal Reserve and the European Central Bank in cutting its main interest rate, but Thursday’s Monetary Policy Report positions the BoE for a change in stance.
Carney said the BoE’s central scenario was that a slowdown in global growth would stabilize and that Prime Minister Boris Johnson’s Brexit deal — which parliament has yet to approve — pointed the way to a reduction in Brexit uncertainty.
If this scenario unfolds, the BoE would still be able to stick to its long-standing message about limited and gradual rate hikes.
But if the outlook deteriorates, the BoE said a rate cut would become more likely.
“These are pretty big tectonic forces operating right now,” Carney told reporters. “If global growth fails to stabilize or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth.”
For Monetary Policy Committee members Michael Saunders and Jonathan Haskel, it was already time to act — they cast the first votes for a rate cut since shortly after the 2016 Brexit referendum.