Bank of England opts against a rate cut but warns of slow growth after Brexit

The Bank of England (BOE) on Thursday held interest rates following Governor Mark Carney’s final monetary policy meeting.

Sterling jumped 0.3% against the dollar to trade at around $1.3060 after the central bank’s Monetary Policy Commitee (MPC) voted 7-2 to keep the base rate at 0.75%.

Weak GDP (gross domestic product) figures had led several members to mull a rate cut, but with January data showing an uptick in confidence and activity following the December 12 general election, expectations of an imminent cut had dampened.

The decision comes at a crucial time for the British economy, with the U.K. set to leave the European Union at 11 p.m. London time on Friday. British and European leaders will now enter pivotal negotiations in a bid to secure a free trade agreement before the end of 2020.

Despite faltering growth of late, the BOE had been one of the few central banks to diverge from the global precautionary easing trend from central banks, with 131 rate cuts implemented by central banks worldwide in 2019.

The BOE issued a downbeat forecast on the eve of Brexit, with uncertainty around the departure continuing to hurt business investment, reduce immigration and weigh on growth. The central bank forecast growth of just 0.8% in 2020, down from 1.3% in 2019 but rising to around 1.5% in 2021.

In its last monetary policy meeting in December, the bank’s forecast for U.K. GDP growth in the fourth quarter of 2019 was cut to +0.1% from the November projection of +0.2%.

Carney will now step aside to be replaced by Andrew Bailey, formerly chief executive of U.K. regulator the Financial Conduct Authority (FCA).