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Surprise as the Bank of England Keeps Interest Rate at 0.5%

The Bank of England has delivered an unexpected verdict on interest rates this afternoon, electing to keep the interest rate at 0.5%.

The Bank of England has delivered an unexpected verdict on interest rates this afternoon, electing to keep the interest rate at 0.5%.

Prior to the announcement by the Bank of England, the market had largely expected to the Bank to reduce the base interest rate to 0.25% following Brexit.


In a statement, the Bank said: ‘The MPC (Monetary Policy Committee) was committed to taking whatever action was needed to support growth and to return inflation to the target over an appropriate horizon. To that end, most members of the Committee expected monetary policy to be loosened in August.


‘... Against that backdrop, most members judged it appropriate to leave the stance of monetary policy unchanged at this meeting.’


The move has been seen by many as an attempt to delay judgement on the economic impact of Brexit until the full extent has been assessed by the MPC. Any cut is now likely to be delayed until August.


Previously, on the morning of the Brexit result, Mr Carney had said: ‘the Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.’


The news from Bank has seen the value of Sterling increased to $1.336 against the dollar as of 12pm, as the markets respond to the Bank’s decision to maintain the base interest rate at its current level. This builds upon the brief rally in exchange rates yesterday following Theresa May’s appointment as the new Prime Minister.


In the housing market, lenders had expected the rate to be cut, offering mortgages with rates as low as 0.99% in an attempt to attract property purchasers during market uncertainty.

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