Monetary Policy Committee vote to leave Interest Rates unchanged as new Bank of England Governor is announced
The Monetary Policy Committee (MPC) announced on December 19th 2019 that it had voted 7-2 to maintain Bank Rate at 0.75% and that it had voted unanimously to maintain the stock of sterling non-financial investment grade bond purchases and the stock of UK government bond purchases. The MPC is tasked with adjusting monetary policy, principally through the adjustment of the base interest rate, to keep the inflation rate around a 2% target to help sustain growth and employment within the UK economy.
An orderly exit from the EU continues to be assumed, where it is expected that the UK and the EU will reach a free-trade agreement by the end of 2020.
The certainty of Brexit occurring by 31st January 2020 is anticipated to increase investment alongside an easing of fiscal policy. As a result of predicted UK and global growth rates improving in the new year, inflation is expected to exceed its 2% target.
The MPC accepted that many economic factors currently monitored could move in either direction saying that it will continue to closely monitor the economy to ensure that monetary policy remains appropriate. The MPC has previously raised Bank Rate twice from its historic low of 0.25% to the prevailing 0.75% rate.
Many retailers have suffered against a back-drop of delayed investment due to continued uncertainty over the UK’s exit from the EU. Big high-street names including Mothercare, Thomas Cook, House of Fraser and Debenhams have all faced administration with a significant number of job losses as a result which has exerted pressure onto the UK economy.
As we start 2020, the composition of the MPC will change when Governor Mark Carney steps down on 15th March 2020 after an eight-year term, making way for Andrew Bailey who will become the 121st Governor after a lengthy selection process. Bailey is a highly respected figure, leaving his post as Chief Executive of the Financial Conduct Authority (FCA) to take up his new post.
Mr Bailey has previously served as Deputy Governor for Prudential Regulation and Chief Cashier and Private Secretary to former Governor, Eddie George.
It is expected that Bailey will be a safe pair of hands to provide stability as the UK historically exits its 47-year membership of the EU. Mr Bailey’s exit from the FCA will lead to a replacement appointment expected to be announced in the new year. These changes may affect policy decisions and strategic directions so we will keep you updated as we learn more.