GBPJPY Pound Sterling vs Japanese Yen

The Bank of England is set to hold interest rates unchanged on Thursday as the economic outlook remains highly uncertain with the Theresa May government being accused of dilly-dallying on reaching a deal over Britain's exit from the European Union. The nine-member Monetary Policy Committee, led by Governor Mark Carney, is widely expected to leave the bank rate unchanged at 0.75 percent and maintain the asset purchase target at GBP 435 billion. The corporate bond purchase target is also expected to be maintained at GBP 10 billion. The policy decision announcement is due at 7 am ET. The previous change in the bank rate was a quarter-point hike in August and the rate is now at its highest level since 2009. A no-deal Brexit and the consequent chaos would tie the central bank's hands and markets are now less convinced that the Bank of England will hike interest rates next year. The UK economy is showing signs of slowing as the uncertainty regarding the country's post-Brexit trade relations remain unclear. Britain is preparing to leave the European Union on March 29, 2019. Despite surviving a recent no-confidence motion triggered within the Conservative Party and delaying a crucial vote on a Brexit deal, Prime Minister May is yet to achieve a consensus among lawmakers regarding Britain's future relationship with the EU. The prospect of a much-feared "no-deal" Brexit is increasing and recent surveys suggest that businesses are readying themselves to face what could be a most chaotic event.

Britain's five leading business groups including the BCC and the CBI, on Wednesday, urged lawmakers to prevent a disorderly "no-deal" Brexit.

"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," heads of the five groups said in a letter.

"While many companies are actively preparing for a 'no deal' scenario, there are also hundreds of thousands who have yet to start - and cannot be expected to be ready in such a short space of time," they added. The Bank of England has warned that a no-deal Brexit would cause a severe recession in the UK, the kind not even seen during the global financial crisis a decade ago.

The central bank's analysis projected that inflation could hit 6.5 percent as the pound dives in a no-deal or disorderly Brexit.

Governor Carney also predicted that food prices could jump as much as 10 percent if there is a 25 percent slump in the pound due to a no-deal Brexit.

Headline inflation slowed to a 20-month low of 2.3 percent in November, ONS data showed on Wednesday, yet remains above the central bank's target of 2 percent.

A recent BoE survey showed that households' inflation expectations for the coming year has risen to a five-year high of 3.2 percent.

UK wage growth hit a decade high in October, suggesting that labor shortages are making employers raise pay to retain existing employees and attract new ones.

And if a no-deal Brexit is avoided, increased earnings could boost spending and contribute to economic growth. Latest data from the ONS revealed that economic growth slowed in the three months to October, mainly due to a fall in car sales and stagnation in manufacturing.

Recent purchasing managers' survey showed that both manufacturing and services growth were subdued in December, while construction expanded at the fastest pace in four months.

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