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BOE keeps interest rates at 0.75%

London

THE Bank of England (BOE) on Thursday said it had voted to keep its main interest rate at 0.75 per cent as it balances Brexit uncertainty and weak global growth.

The Monetary Policy Committee decided unanimously to hold borrowing costs at a regular meeting held Wednesday, the BOE said in published minutes.

"Since the MPC's previous meeting, the trade war between the United States and China has intensified, and the outlook for global growth has weakened," the bank said.

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It noted also that "shifting expectations about the potential timing and nature of Brexit have continued to generate heightened volatility in UK asset prices, in particular the sterling exchange rate".

Unlike the European Central Bank and US Federal Reserve which are both cutting rates, the BOE is sitting tight, also as inflation weakens in Britain. "In the event of a no-deal Brexit, the exchange rate would probably fall, CPI inflation rise and GDP growth slow," the BOE said.

The British pound and government bond yields fell on Thursday after the BOE announcement.

The yield on 10-year gilts fell 2 bps on the day to 0.62 per cent, the lowest level in a week. Sterling fell 0.25 per cent at US$1.2438. The pound fell towards the day's lows after the statement, down 0.25 per cent at US$1.2438 versus a broadly weak dollar.

The fall in sterling led London's blue-chip stocks index to extend gains and hit the day's high. At 1126 GMT, the FTSE 100 was up 0.7 per cent, set for its best day in a week-and-a-half.

"Cuts (in rates) are increasingly likely due to the prolonged uncertainty around Brexit. In fact, considering how sensitive the UK banking system is to softening house prices, we wouldn't be surprised if the Bank of England gets ahead of the curve," Artur Baluszynski, head of research at Henderson Rowe, said. AFP, REUTERS