BOE keeps its rates of interest on hold at 0.75% as uncertainty looms large regarding Britain’s exit from the EU. On Thursday the bank released a statement saying that its rate-setting panel consisting of 9 members voted unanimously to keep rates of borrowing unchanged, 1month after it sanctioned an increase of a quarter point. The Monetary Policy Committee gave a suggestion that the monetary policy could have to be tightened in the near future so that inflation rates can go back to 2% from its present 2.5%. It added that the responses by financial and business markets and households to the Brexit would influence Britain’s economy. Britain is all set to leave the European Union in March but their trade relations are still uncertain. Rate-setters said that since the earlier meeting, uncertainties have only increased. The forecasts by the bank have for so long assumed that the adjustments and transition in trade between Britain and the EU would be nothing but smooth. Britain’s reliability on the EU is great as it is its greatest buyer and export, partner. And hence Britain depends largely on workers and money from the bloc. Failure to come to a conclusion about the deal on Brexit could negatively affect the British economy- like slapping of tariffs on British exports and enforcement of additional charges on cross-border payments.
Both the EU and Britain have been working to secure a deal by the month of October. But the deadline seems to have been pushed a month further. Uncertainties have increased because of the divisions between British parliament and governing minority Conservative government.
After the nation voted in June 2016 in favor of the exit from the EU, the economy didn’t fall into a recession as several economists had predicted, although growth has been slowed down partly. This is because of decreased investment in Britain by businesses owing to the unclear status of the country and the EU’s trading relationship in the future. Early this week, Jaguar Land Rover chief issued a warning stating that jobs of tens of thousands of its employees could be at risk if no deal is secured.