Interest rates held as Bank says recession is a one in four chance

The Bank has also revised its growth projection of 1.7 per cent for 2019, published in November, down to 1.2 per cent as it warned there is a one-in-four chance of the economy slipping into recession in the second half of the year.

It put the fall in growth down to a decline in business investment and housebuilding, as well as a halving of the growth rate in exports.

The bank also said it had seen further evidence that businesses were being cautious in the run-up to Brexit, including evidence from its own survey of firms.

The UK was also being hit by slower-than-expected growth in the eurozone and China, the Bank said in its Quarterly Inflation Report.

“Growth appears to have slowed at the end of 2018 and is expected to remain subdued in the near term,” it said.

Tej Parikh, senior economist at the Institute of Directors, said: “With just 50 days until Brexit, businesses will find comfort in the Bank’s decision to bide its time before embarking on rate hikes.

“Right now, many firms have little appetite to invest in the midst of uncertainty while there are also signs that consumer confidence is waning, so it’s important that interest rates remain low.

“It’s clear that domestic political events are not the only thing giving the MPC a headache. A subdued outlook for global growth, tied to the EU and China’s slowing economies, is likely to have a knock-on impact on UK trade, and that’s contributed to the Bank’s bigger than expected cut to UK growth forecasts.

“Understandably, the MPC has struck a fairly cautious tone today. While promising wage figures may be a harbinger of higher inflation down the line, the known unknowns and global picture mean that ‘wait-and-see’ seems the only option for now.”