LONDON (AP) — The Bank of England kept its main interest rate unchanged at 0.50 percent on Thursday, a month after increasing borrowing costs for the first time in a decade to contain a rise inflation stoked by last year's Brexit vote.
The decision was widely anticipated even though official figures this week showed annual inflation rising further above the bank's 2 percent target, to 3.1 percent. All nine members of the Monetary Policy Committee voted to keep rates unchanged.
Last month, while raising interest rates, the Bank of England published forecasts that showed inflation is likely to ease back next year, but not to the target, as the inflation-boosting impact of the pound's fall following the vote to leave the European Union fades. The lower pound raised the price of imported goods like food and energy.
Policymakers have also voiced concerns over raising rates too much given the economic uncertainty surrounding Brexit, due to take place in March 2019. The Brexit vote has elevated uncertainty in the British economy and that's seen growth falter over the past year.
Brexit, according to the rate-setters in the minutes to the meeting, remains the "most significant influence on, and source of uncertainty about, the economic outlook."
The decision comes as British Prime Minister heads to Brussels for a summit of EU leaders where she hopes to win approval for the Brexit talks to move onto trade matters following an agreement last week on citizens' rights, the Irish border and Britain's divorce payment.
Despite that agreement between the British government and the EU representatives, there's still a welter of uncertainty related to Brexit, not least what it entails when Britain formally leaves the EU in March 2019. A parliamentary defeat for May on Wednesday over Parliament's role in authorizing the final deal is perceived to have chipped away at the boon offered by last week's deal.
"In such exceptional circumstances, the MPC's remit specifies that the Committee must balance any trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity," the rate-setting panel said, according to the minutes.
Overall, the Committee said it remained of the view that were the economy to follow the path anticipated in November's projections, then "further modest increases" in interest rates "would be warranted over the next few years, in order to return inflation sustainably to the target."
However, the committee stressed that any future increases are expected to be "gradual" and "limited."
The next meeting of the MPC is in February.
At the moment, the prevailing view is that there won't be any more rate increases in the months ahead given the Brexit uncertainty.
"Policymakers will naturally be keen to raise rates as fast as the economy allows, if only to provide some firepower when the next economic downturn arrives," said Ben Brettell, senior economist at stockbrokers Hargreaves Lansdown.
"But with domestic inflationary pressures thin on the ground and Brexit casting its customary shadow, there's no real imperative to move for some time."