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Economy

Bank of England holds key rate steady as extended Brexit deadline looms

Mark Carney, governor of the Bank of England

The Bank of England's Monetary Policy Committee kept the central bank's main interest rate unchanged at 0.75%, and the investment industry is forecasting that August will be the bank's last chance to hike this year ahead of the Oct. 31 Brexit deadline.

The central bank said Thursday that committee members voted unanimously to keep the rate steady.

The stock of corporate bond purchases and the U.K. government bond purchases also remain unchanged. Sterling investment-grade corporate bond purchases and gilt purchases, both financed by the issuance of central bank reserves, will remain at 10 billion ($12.9 billion) and 435 billion, respectively.

Investment professionals said the U.K. central bank's decision was expected and next move remains contingent upon circumstances surrounding Brexit.

"The Bank of England was on hold today, as largely expected, and the committee unanimously voted to keep policies unchanged," Silvia Dall'Angelo, senior economist at Hermes Investment Management, said in an emailed comment. "However, the BOE maintained its mild tightening bias, and its updated forecasts suggested that the BOE deems market's expectations of one rate hike over the next three years as too complacent."

Ms. Dall'Angelo said the bank is maintaining flexibility and keeping its options open. "However, it is unclear whether evolving conditions will offer the BOE an opportunity window to hike rates sometime over the next year, amid moving Brexit deadlines, domestic and external challenges," she said.

Nick Wall, portfolio manager at Merian Global Investors, said in an emailed reaction that Brexit "looms over the committee" and may prompt its members to hike rates this summer, should economic data continue to improve at home and abroad.

Mr. Wall thinks U.K. domestic data has picked up with strong retail sales, a tightening labor market and a high manufacturing. "Ordinarily, we believe they would be hiking rates with this backdrop," he said.