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BoE Holds Policy Steady As Survey Shows Firms Preparing For Disorderly Brexit

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Bank of England policymakers decided that it was appropriate to keep the interest rate and monetary stimulus unchanged this month as UK lawmakers scramble to secure an extension of the deadline for leaving the European Union.

The bank also released the results of a survey which showed that "a significantly greater number of companies had judged themselves ready for a no-deal, no-transition Brexit scenario."

The central bank reiterated that a further tightening of policy at a gradual pace may be need if the economy expands in line with projections, but added that a lot depends on how Brexit pans out.

"The MPC judged that the monetary policy response to Brexit, whatever form it took, would not be automatic and could be in either direction," the bank said.

The nine-member Monetary Policy Committee, led by Governor Mark Carney, unanimously decided to hold the bank rate unchanged at 0.75 percent, in line with economists' expectations.

The previous change in the bank rate was a quarter-point hike in August 2018 and the rate is now at its highest level since 2009.
The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

"The Committee continued to judge that, were the economy to develop broadly in line with its February Inflation Report projections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2 percent target at a conventional horizon," the Bank of England said.

The BoE Agents survey of almost 300 business contacts between January 29 and March 1 revealed that around 80 percent of companies judged themselves 'ready' for a 'no deal, no transition' Brexit scenario, compared with around 50 percent of companies in the January survey.

However, "many of those companies had also reported that there were limits to the degree of readiness that was feasible in the face of the range of possible outcomes," the bank added.

Further, the bank said companies had continued to report "significantly weaker" expectations of output, employment and investment in the event of a no-deal, no-transition Brexit.

The central bank forecast 0.3 percent growth for the first quarter, and said this was "marginally stronger" than previously expected.

The bank also warned that "further cliff-edge uncertainties" could have "a significant effect on spending as any new deadline approached".

Inflation is expected to remain close to the 2 percent target over coming months. Headline inflation edged up to 1.9 percent in February.

"Overall, the Committee judged that underlying inflationary pressures appeared to be broadly on track with the projections underlying the February Report," the bank said.

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