The Bank of England has kept interest rates on hold and opted against injecting another dose of stimulus into the British economy as it waits to hear whether a post-Brexit trade between the U.K. and the European Union is agreed in time for the new year.
In a statement released Thursday, it said the nine rate-setters on the Monetary Policy Committee voted unanimously to keep the bank’s main interest rate at the record low of 0.1% and to maintain the monetary stimulus already in place.
It said the main news since it boosted its bond-buying program in November has been the successful trialling of coronavirus vaccines and the rollout in the U.K. of the one developed by America’s Pfizer and German biotechnology firm BioNTech. Financial markets and some business and consumer surveys have been buoyed by the developments.
“This is likely to reduce the downside risks to the economic outlook from COVID,” the committee said.
However, the committee warned that recent global activity has been affected by the increase in cases and the associated re-imposition of restrictions. U.K. growth is set to be weaker than anticipated in November.
The British economy is expected to end this year around 12% smaller than it started as a result of the pandemic and the restrictions on business activity and public life. That would be its deepest recession in three centuries.
The committee said the outlook for the economy remains “unusually uncertain” and “depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom.”
It also said it stands ready to do more if inflation remains way below target. Currently, the U.K.’s annual inflation rate stands at just 0.3%, way below the bank’s target of 2%.
The committee said it “does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”