UK economy is still set for worst performance in 100 years according to the UK's central bank.Read more
Szu Ping Chan
Business reporter, BBC News
BBC Radio 4
On Thursday, the Bank of England voted to keep interest rates at 0.75% but the Monetary Policy Committee (MPC) said it was poised to cut if necessary.
So will that happen at the next meeting in March?
Former MPC member Andrew Sentance tells the BBC's Today programme: "If forecasts turn out the way the Bank is expecting, I do not think we need to see an interest rate cut."
He points out that since interest rates had been "at a very low level" for a long time, "the benefit of a cut would be very modest."
Mr Sentance says keeping rates at such a low level "does not necessarily help the economy in the long term" and expressed disappointment about that aspect of Mark Carney's time as Bank governor. "Monetary policy has been adrift," he says.
On balance, this seems like a sensible decision by the MPC as more data is needed to see if the economy has indeed enjoyed a sustainable 'Boris bounce' since the election. Most recent business and consumer surveys do show a pick-up in confidence and the housing market also seems to have perked up in January, but we don't yet have any official data confirming an upturn in actual consumer spending or business investment. There are also many global uncertainties to consider, including the extent of the further spread and economic impact of the new coronavirus. If the UK economy fails to lift off in the first quarter, whether for domestic reasons or due to further adverse global shocks, then a rate cut could be on the cards in the spring.
Szu Ping Chan
Business Reporter, BBC News
The Bank of England press conference has begun and outgoing governor, Mark Carney, says the last decade ended “with a whimper” with a marked slowdown in global growth led by a manufacturing recession.
UK growth last year was its weakest since 2010 and business investment remains subdued.
So will the next decade start with a bang? Mr Carney says global growth has now stabilised.
An easing of trade tensions has played a part. So have central banks, with the European Central Bank and Federal Reserve opting to cut rates last year.
Manufacturing activity is on the up he says, and there are signs from around the world that economies are getting stronger.
The pound has risen 0.35% against the dollar to $1.3067 after the Bank of England's Monetary Policy Committee voted to hold the interest rate.
Sterling also gained against the euro, up 0.21% at €1.1849.
The MPC made clear, however, that it may act if the UK economy fails to gain momentum.
"With Mark Carney seemingly having deferred this policy decision to his successor, Andrew Bailey will need to land on his feet running," says Principal Global Investors' market strategist, Seema Shah.
"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.".
Minutes from the Bank of England's Monetary Policy Committee meeting show that they expect an improving global backdrop and reduction in uncertainty following prime minister Boris Johnson’s election victory to support the UK economy.
However, the MPC said it was poised to lower interest rates if the expected post-election bounce failed to materialise.
“Policy might need to reinforce the expected recovery in UK GDP growth should the more positive signals from recent indicator of global and domestic activity not be sustained,” the minutes said.
Members of the Bank of England's Monetary Policy Committee voted 7-2 to keep the interest rate on hold at 0.75%.
Governor Mark Carney voted with the majority in his last meeting as head of the Bank of England. He will be succeeded by Andrew Bailey, currently head of the Financial Conduct Authority.
MPC members Jonathan Haskel and Michael Saunders had voted for a quarter point cut.