The Bank of England kept its main interest rate on hold at 0.75% on Thursday as it awaits more clarity over Britain’s departure from the European Union.
The decision by the central bank’s nine-member Monetary Policy Committee was expected. However, two members surprised by voting for a quarter-point cut and that put pressure on the pound, which fell from $1.2855 to $1.2825 in the aftermath of the news.
The committee has been reluctant to move interest rates for over a year given the huge uncertainty surrounding Brexit. Britain’s general election on Dec. 12 has the potential to affect the outcome of Brexit.
The Brexit impasse is increasingly weighing on the economy, particularly on business investment.
It’s unclear whether the election will lead to more Brexit clarity, though, particularly if no one party manages to win an outright majority.
“Given the political uncertainty ahead of next month’s election it is not at all surprising that the central bank has decided to refrain from any change in policy, but the calls from some members for rate cuts come as something of a surprise and has caused an adverse reaction in the pound,” said David Cheetham, chief market analyst at XTB.