The Bank of England decision to hold interest rates at the record low of 0.5% has passed another milestone as the figure has now remained unchanged for seven years.
The interest rate has never been so low for so long.
The bank’s monetary policy committee voted to reduce the rate to 0.5% in March 2009.
Policymakers explained that uncertainty over the British economy in the run up to the Brexit referendum in July was weakening the Pound and delaying external investment.
Canadian pension funds have already suspended deals worth hundreds of millions of pounds until after the vote.
Paralysed economy
The bank fears uncertainty could paralyse the economy for three months as business, banks and institutional investors hold moving their money into the UK.
“With this uncertainty over the referendum, the uncertainty is definitely pushing down the value of the Pound which is leading to spending decisions being put off and depressing growth in the short term,” said bank governor Mark Carney.
Chancellor George Osborne confirmed the UK economy had stalled in his Budget 2016 – with GDP forecast as 2% this year compared with 2.2% last year.
In common with other central bank policymakers, the bank is concerned that global growth is too low and that inflation is not high enough to spark demand.
But they have nowhere to go, with interest rates in most advanced economies so low and the price of oil bringing prices down even more.
Federal Reserve puts rate rise on hold
“We have some capacity for more financial easing if needed, but we will not stray into negative rate territory like the European Central Bank or Japan,” said Carney.
Meanwhile, the US Federal Reserve has also had a rate setting meeting this week.
The official US interest rate was left unchanged at 0.5% but the Fed warned strong US economic data could mean two further rises of 0.25% each later in the year.
“The jobs market is stronger and inflation is picking up,” said a Fed spokesman.
“However global economic weakness pose risks to the recovery and will keep inflation down for the rest of the year.”
The Fed also indicated average interest rates are likely to settle between 3% and 3.5% – a sign that growth is expected to stutter rather than boom.
