Bank of England leaves key rate unchanged - MarketWatch

The Bank of England left its key interest rate unchanged Thursday, citing "tentative" signs that global economic growth has stopped slowing.

However, two of the central bank's nine rate setters again voted for a cut in the key rate to 0.5% from 0.75%, arguing that U.K. economic growth has been weaker than anticipated and the jobs market is cooling.

Jonathan Haskel and Michael Saunders argued that it would be good "risk management" to cut the key rate ahead of a potential slowdown in growth, since there isn't much room to reduce borrowing costs in a series of moves given they are already at a low level.

The majority of rate setters continued to expect that economic growth would pick up next year "given the assumed combined support from lower uncertainty, easier fiscal policy, and somewhat stronger global growth."

The MPC as a whole said a rate cut might be needed if the global economy continued to slow and high levels of uncertainty about the timing and terms of the U.K.'s departure from the European Union remained "entrenched."

But policy makers agreed that if those drags on growth didn't materialize, a "modest" rise in the key interest rate might be needed.

The twists and turns of the Brexit process have dominated the U.K.'s economic outlook since the June 2016 vote to leave the EU. Prime Minister Boris Johnson's victory in a Dec. 12 election means the U.K. will now leave the EU at the end of January. However, it is still possible that it will complete a transition period at the end of next year without a new trade agreement.

The BOE said a recent rise in the pound's exchange rate and equity prices reflected the reduced risk of a disruptive departure from the EU, and it is possible confidence among households and businesses will rally in coming months.

"There is no evidence yet about the extent to which policy uncertainties among companies and households had declined following recent domestic policy developments," it said.

Write to Paul Hannon at paul.hannon@wsj.com

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Bank of England leaves key rate unchanged - MarketWatch
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