Although there had been suggestions that a further cut to Base Rate could be on the cards, it came as little surprise that the Bank of England elected to make no change in its November meeting.
The feared economic slowdown following the EU referendum hasn’t materialised – or perhaps, the action already taken in August has helped - so the need for further, immediate action has receded.
At the same time the fall in the value of the pound has meant inflation is on the increase. The minutes of the Monetary Policy Committee show inflation is now expected to run above target for some time. The fact that this is largely driven by external factors, and remaining concerns about how the economy will fare, means the Bank is willing to wait and watch for the time being.
It’s notable, though, that unlike previous statements the minutes contain no reference to further cuts in Base Rate. Instead they finish on a more balanced note indicating the Committee is ready to move interest rates in either direction, as developments dictate.
Whether this constitutes a change in expectation of how rates may or may not move remains to be seen. More likely it underlines the fact that there remains a good degree of uncertainty. It’s possible to formulate different outlooks that could merit a rise or cut in Base Rate.
As a result, the Bank’s message remains that it is prepared to take whatever action it feels is necessary, as the journey toward Brexit develops.
Bank of England holds base rate at 0.25%