LONDON (Reuters) – The Bank of England kept interest rates steady at Governor Mark Carney’s final policy meeting as it saw signs of a post-election pick-up in growth which weakened the case for immediate action to help the lacklustre economy.
Financial markets had seen a 50% chance of a cut on Thursday, which would have echoed moves last year by the U.S. Federal Reserve and the European Central Bank.
But the Monetary Policy Committee (MPC) again split 7-2 in favour of keeping Bank Rate at 0.75%, with external members Michael Saunders and Jonathan Haskel voting for a cut.
Sterling jumped around half a cent against the dollar though interest rate futures still pointed to a rate cut, probably in May, after Carney hands over to Andrew Bailey.
Carney highlighted 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’,” he said.
ING economist James Smith said the business surveys which have pointed to a recovery sometimes overstated upturns and downturns.
“The lingering question of policy easing is unlikely to go away just yet. It all really hinges on whether the economy sees a Brexit bounce,” he said, adding that either way, Brexit uncertainty was likely to return later this year.
Prime Minister Boris Johnson’s unexpectedly emphatic Dec. 12 election win has boosted optimism, particularly among businesses who had cut investment while parliament failed to resolve the Brexit impasse.
But the BoE downgraded its longer-term view for the economy, saying border checks from 2021 would add to drags on growth,