The Bank of England left its base rate unchanged at 0.75% Thursday as widely expected, though two dissenters preferring lower rates were a bit of a surprise that sent the sterling sharply lower.

In his news conference following the announcement Governor Carney repeatedly stressed that the bank and the Monetary Policy Committee (MPC) must base its assessments and projections on government policy.

Given that the current policy on the exit of the UK from the European Union is Prime Minister Boris Johnson’s Brexit deal the bank sees a gradual increase in the UK economy over the next three years, gaining in tempo as Brexit fades into the past.

“The recent UK EU trade agreement [has] created the prospect for a pickup in growth,” he said.

Within that overall assessment the potential scope for policy is essentially unlimited.  The bank may, as the Brexit and global futures unfold, find that rate cuts or hikes are the appropriate policy response.  

“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 ahead, provided these risks do not materialise and the economy recovers broadly in line with the MPC’s latest projections, some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the target,” said the MPC statement.

With that range of possibilities and a general election in a little over a month that is expected but by no means guaranteed to produce certainty about the British EU exit the governors chose to keep their options wide open.

Mr. Carney refused, when asked, to be drawn into the Brexit argument by judging whether the Prime Minister Johnson’s exit deal or a hypothetical retention of EU membership would be better for the UK economy.  

“We do not have the luxury or remit to compare this situation [Brexit] with some parallel situation [without Brexit]…The core of the [MPC] forecast is what happens if this deal continues, if it is implemented,” he noted.

On the topic of his own tenure at the head of the world’s oldest central bank which is scheduled to end on January 31st Mr. Carney would not say if he would stay if asked or even if he had been asked to remain.

When questioned near the end of the press conference how high was the bar for a policy easing with 10 at the top, Mr. Carney laughed and said softly, “I’m so clearly not going to answer that.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD rebounds after dismal US PMIs

EUR/USD is trading closer to 1.0850, rising in response to weak US PMIs, with the services one pointing to contraction. Earlier, German Manufacturing PMI beat estimates. 

EUR/USD News

GBP/USD advances to 1.2950 after US data

GBP/USD is trading around 1.2950, taking advantage of US weakness stemming from a downfall in Markit's Services PMI in the US. In Britain, the Manufacturing PMI exceeded estimates. 

GBP/USD News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Consolidation process underway

The Crypto board continues to be immersed in an emotional leg-breaking, consistently punishing the emotional state of the traders with its continuous changes of direction.

Read more

XAU/USD unstoppable, breaks to fresh 2020 highs, approaching $1650/oz

XAU/USD is trading in an uptrend above its main daily simple moving averages (SMAs) while breaking above a bull channel. Gold is printing fresh 2020 highs hitting $1646.64 per ounce on an intraday basis.  

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors

Cryptocurrencies

Signatures