The rate decision comes at a time when global growth concerns abound, typified by the OBR’s (Office for Budget Responsibility) downgrade of the UK growth forecast. In addition, uncertainty surrounding the EU referendum in June seemed to be one of the main drivers of the recent decline in sterling, which has depreciated by around 9% from its peak in mid-November 2015.
The Chief Economist at financial information firm Markit, Chris Williamson, was quoted as saying that the decision to retain the rate was “no surprise”, elaborating, “The Bank highlighted how uncertainty regarding the June vote on the UK’s membership of the EU is exacerbating wider concerns about the domestic and global economic outlook.
“Policymakers noted how spending by businesses and overall demand in the economy could weaken as a result of the intensifying Brexit fears, which would worsen an already shaky start to the year.”
At the same meeting the MPC also unanimously voted in favour of the proposition that The Bank of England should maintain the stock of purchased assets financed by the issuance of central bank reserves (‘quantitative easing’) at £375 billion.
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