Bank of England maintains rates, revises up growth forecasts

The Bank of England revised up its growth forecasts for the British economy for this year and next as it opted against another interest rate reduction in the wake of the country's decision to leave the European Union.

Conceding that its earlier predictions over the immediate impact on growth stemming from the Brexit vote were too gloomy, the bank's policymaking Monetary Policy Committee decided today to keep its main interest rate at a record low 0.25 per cent.

The decision was unanimous among the nine-member panel and came as the pound surged to near month-highs against the dollar following a court ruling that the government can't trigger the Article 50 process for Brexit without Parliament's involvement.
 

It also came in the wake of recent figures showing that Britain's economy grew by a forecast-busting quarterly rate of 0.5 per cent in the July-September period and amid growing signs of a marked pick-up in inflation.

The British economy has showed unexpected resilience following the Brexit vote. Growth has been stronger than many economists, including forecasters at the Bank of England, had anticipated.

Many had warned that growth would slow dramatically after the June 23 vote to leave the EU, a decision which spurred the bank to cut rates for the first time in more than seven years and expand its economic stimulus program in August.

The bank's governor, Mark Carney, said much of the resilience that's been exhibited has centered on households seemingly ready to "entirely look through Brexit-related uncertainties" for now.

"For households, the signs of an economic slowdown are notable by their absence," Carney told a briefing after the interest rate decision.

"Perceptions of job security remain strong. Wages are growing at around the same modest pace as the start of the year. Credit is available and competitive. Confidence is solid."

In light of all the new information to hand, the Bank revised up its growth forecasts for the coming two years in the quarterly economic forecasts that accompanied the rate decision.

Instead of 2 per cent growth this year, it's now penciling in 2.2 per cent. And next year, it's now penciling in growth of 1.4 per cent instead of 0.8 per cent.