He said: “The recent evidence of United Kingdom economic resilience has seemingly diluted the case for more Bank of England stimulus in the immediate future”.
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It scaled back its expectations of a sharp slowdown following the poll and increased its third quarter growth forecast for gross domestic product from 0.1% to 0.3%. “(BoE policymakers) still think they will have to cut rates again this year”, said ETX Capital markets analyst Neil Wilson.
The MPC also voted last month to cut the interest base rate for the first time since 2009 to an unprecedented 0.25 per cent, and undertook the largest British quantitative easing package since the global financial crisis.
The Bank cut interest rates to a new record low in August as part of a range of measures created to help boost demand following the vote to leave the EU.
Its governor Mark Carney last week defended the move, saying it was partly thanks to such action that the economy had held up after the June vote to exit the EU.
In the minutes of its latest meeting, the MPC said since its August Inflation Report, a number of indicators of near-term economic activity in the United Kingdom have been somewhat stronger than expected.
The data on consumer spending and the housing sector had been better than expected, but investment surveys had suggested further weakness.
“It would be wrong, though, to be considerably more optimistic in view of the good economic data following the Brexit referendum”.
Sterling slipped against the euro and dollar on Thursday, after the Bank of England left interest rates at their record lows and indicated that it would cut them further later this year. However, if it does cut close to zero later this year it will have very few monetary policy bullets left to fire if the United Kingdom economy slips into recession.
“As MPC member Kristin Forbes warned in front of the Treasury select committee, the recent run of strong data must be taken cautiously with a potential downturn around the corner as Brexit negotiations begin and the economy processes the consequences”.
The Bank of England said it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain’s economy would be less severe than it expected only last month. While that’s up from 0.1 per cent previously predicted, it would still be just half the pace recorded in the three months through June. That is when economists expect it to cut borrowing costs to around 0.1 per cent. He says he will slow the push to turn Britain’s budget deficit into a surplus and may announce higher public spending in a budget statement on November 23.
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The BoE added it’s tough to predict economic growth for next year. Earlier in the day, data showed retail sales volumes edged down 0.2 percent on the month in August after jumping an upwardly revised 1.9 percent in July, the strongest July performance in 14 years.
