LONDON, June 20 (Xinhua) -- The Bank of England (BoE) Thursday held the bank rate at 0.75 percent, and warned increased downside risks for UK economy.
All nine members of the Bank's rate-setting Monetary Policy Committee (MPC) agreed to keep the rate at 0.75 percent.
The Bank noted in the minutes of the June MPC meeting that downside risks had increased over the past month, citing global trade tensions which had "intensified" and the rising "likelihood of a no-deal Brexit".
Increased Brexit uncertainties had put "additional downward pressure" on UK forward interest rates and led to a decline in the sterling exchange rate, the minute noted.
The Bank saw Consumer Price Index (CPI) inflation falling below its target of 2 percent later this year. The latest CPI figure released this week for May was 2 percent annual increase.
Growth in gross domestic product (GDP) for the second quarter was expected to be flat, a fall from the growth of 0.5 percent quarter-on-quarter in Q1.
While first quarter growth benefited from stockpiling ahead of a possible sharp Brexit at the end of March, this boost has disappeared for the second quarter and maintaining or reducing stock levels would lead to an unwinding of the growth boost from the first quarter.
Further pressure on second quarter growth would likely come from car production, where some manufacturers had brought forward regular annual shutdowns to April, in reaction to a possible March Brexit.
This led to a 24 percent fall in motor vehicle production, which will likely depress second quarter GDP growth by about 0.1 percentage point, the Bank noted.
The Bank said that under the assumption of a smooth Brexit it expected interest rates to tighten "at a gradual pace and to a limited extent".
However, the Bank warned that the nature of Brexit would have a "significant" economic impact and it could lead to either a future increase or decrease in the bank rate.
