The Bank of England's Monetary Policy Committee voted by a majority of 7-2 to maintain Bank Rate at 0.75%, with Jonathan Haskel and Michael Saunders voting to reduce interest rates to 0.50%. Alongside Brexit-related volatility, the MPC noted that underlying UK GDP growth has "slowed materially this year" and a small margin of excess supply has opened up. The slowdown reflects weaker global growth and the domestic impact of Brexit-related uncertainties. CPI inflation remained at 1.7% in September and is expected to decline to around 1.25% by the spring.
However the decreased likelihood of a no-deal Brexit has fallen markedly which the MPC says will "remove some of the uncertainty facing businesses and households", causing GDP growth to pick up during 2020. Additionally, in the second half of the MPC’s forecast period, a significant margin of excess demand emerges and domestic inflationary pressures are expected to build. Conditioned on current market yields, CPI inflation is projected to rise to slightly above 2% towards the end of the forecast period
In its minutes, the MPC said that "if global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation". Further down the line, the Committee judges that "some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably" at its 2% target.