Bank of England notes upside economic news as it holds rates

A bus carries passengers past the Bank of England in London on Thursday July 14, 2016. (AP / Adela Suliman)

LONDON -- The Bank of England kept its main interest rate unchanged at a record low of 0.25 per cent Thursday after a run of better-than-anticipated news in the wake of the country's decision in June to leave the European Union.

The unanimous decision was widely anticipated after last month's series of post-Brexit measures by the bank's policymaking body that included a quarter-point interest rate cut and an expansion of its stimulus program. The nine-member panel also voted unanimously to continue with its stimulus, which includes buying corporate and government bonds.

Since the August round of measures from the central bank, there's been a raft of data pointing to the British economy holding up better than anticipated in the wake of the Brexit vote.

Though the decision to leave the EU proved a huge surprise to many in the financial markets and prompted a dramatic slide in the value of the pound, the real economy has exhibited a relatively high degree of resilience. Retail sales, house prices and industrial production all have held up.

In a statement accompanying the decision to keep policy unchanged, the Bank's Monetary Policy Committee conceded that news on the near-term momentum of the economy had been "slightly to the upside" relative to its most recent projections made in August. It noted a "less negative" near-term outlook for the housing market and better than anticipated consumption data.

"The Committee now expects less of a slowing in U.K. GDP growth in the second half of 2016," it said. Last month, it had forecast that growth would be negligible in the second half of the year as businesses and consumers responded to the uncertainty generated by the Brexit vote.

The monetary policy committee remained cautious, however, saying "the contours of the economic outlook following the EU referendum had not changed." It said the economic news since the June 23 Brexit vote was "consistent" with its August judgment that "business spending would slow more sharply than consumer spending in response to the uncertainty associated with the United Kingdom's vote to leave the European Union."

With its broad Brexit assessment intact, analysts said the committee has left the door open to a future rate cut and stimulus package, possibly in November when it will be armed with updated forecasts. As a result, the pound fell in the wake of the decision and was trading 0.5 per cent lower at $1.3190.

One potential argument against further easing measures is inflation.

The committee's main job is to contain inflation -- to keep consumer price increases at around 2 per cent annually. The fall in the pound since the Brexit vote -- from around $1.50 to 31-year lows below $1.30 at one stage -- has stoked potential inflationary pressures as it increases import costs.

In spite of that, inflation held steady in the year to August at 0.6 per cent, possibly because businesses are absorbing the hit -- for now. In its statement Thursday, the committee said it expects inflation to rise toward the 2 per cent target in the first half of 2017.