The Bank of England Preview: The Bank rate set to remain on hold amid Brexit uncertainty peaking

• The Bank of England Monetary Policy Committee is expected to hold the Bank rate steady at 0.75% on the December policy meeting amid slowing inflation and peaking Brexit uncertainty.
• The Bank of England is expected to voice the Brexit uncertainty language of the accompanying policy statement while reflecting on higher wages and slowing inflation amid falling oil prices.
• The Bank of England is also expected to point to a slowdown in the economic activity amid political uncertainty.

The Bank of England Monetary Policy Committee (MPC) is expected to keep the Bank rate unchanged at 0.75% in the December meeting amid a highly uncertain outlook for both the economy and monetary policy as the Theresa May government is struggling to push her Brexit deal through the UK parliament.

An increased possibility of a no-deal Brexit possibly throwing the UK economy into the disarray keeps the Bank of England standing on the sidelines and waiting for further development.  After the Bank raised the Bank rate by a quarter of percentage points to 0.75% in August to the highest level in the last decade, the UK economy marked an obvious deceleration in the economic activity in last two months as Brexit uncertainty keeps businesses unwilling to make any investment decisions leaving future trade relations with the European Union unclear. 

The UK leading business associations urged the lawmakers in the UK parliament to act on Brexit deal and remove the uncertainty. "Businesses of all sizes are reaching the point of no return, with many now putting in place contingency plans that are a significant drain of time and money," the statement from the CBI, British Chambers of Commerce, Institute of Directors, Federation of Small Businesses, and the manufacturers' organization EEF said.

The Bank of England warned of disorderly Brexit earlier saying that no-transition and no-deal Brexit would cause a severe slump of GDP of -7.75% up to -10.50% with the unemployment rate rising to 7.5%, inflation jumping to 6.5%, house prices down 30% and Sterling falling up to 25%.  

The political uncertainty related to Brexit and recent economic slowdown are both expected to be the main points in the Bank’s accompanying statement along with mention of UK wages rising strongly. The cautious tone of the Bank of England statement is unlikely to result in any substantial money market or currency market reaction.