With a huge amount of uncertainty concerning a potential No Deal Brexit, the Bank of England has rightly decided that this is no time for surprises. As the market predicted, the MPC has chosen to stick to its holding pattern and wait-and-see. This mirrors most UK manufacturers and other businesses who are currently like a rabbit caught in the headlights, struggling to figure out what to do next.
The Inflation Forecast tables downgraded GDP growth for 2019 to a level that would be the worst annual GDP performance since the Global Financial Crisis. Even though the Bank expects a catch-up recovery in 2021 - albeit this is based on the assumption we avoid a No Deal Brexit – today’s figures reflect the growing difficulties businesses are facing and the decline in investments and trade firms are contending with as Brexit anxiety increases.
Today’s decision is also a reflection of a worsening global traded outlook, with relations between China and the US deteriorating, a further indication of the importance to the UK economy of parliament getting the Prime Minister’s Withdrawal Agreement over the line.