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Mark Carney, Governor of the Bank of England speaks at a Bank of England Financial Stability Report Press Conference, in London, on Dec. 16, 2019.

The Associated Press

The Bank of England kept interest rates steady on Thursday, saying it was too soon to gauge how much Prime Minister Boris Johnson’s election victory would affect the Brexit uncertainty that has hung over the economy.

Two of the BoE’s nine policy makers voted for a second month in a row for a cut to borrowing costs because of fears that Britain’s jobs boom is deteriorating.

But the majority took a wait-and-see approach at the penultimate rate-setting meeting for Governor Mark Carney, whose term ends on Jan. 31.

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“There was no evidence yet about the extent to which policy uncertainties among companies and households had declined following recent domestic policy developments,” the BoE said in a statement.

Sterling rose and British government bond prices fell on the news.

“Effectively the Monetary Policy Committee has taken some heart from developments over the past month or so, namely that the outlook for Brexit now looks a bit clearer,” Philip Shaw, an economist with Investec, said.

The BoE also indicated that the prospects for the global economy had improved as it noted a “partial de-escalation” of the U.S.-China trade tensions.

But Mr. Shaw said a BoE rate hike over the next year looked very unlikely.

After Mr. Johnson’s emphatic election win last week, Britain is on course to leave the European Union on Jan. 31 with a transition deal, which the BoE said could reduce some of the immediate uncertainty hovering over businesses.

But many companies are already looking to the end of 2020, when they will face tariffs on exports to the EU unless Mr. Johnson succeeds in negotiating a trade deal before then – or breaks his word and allows an extension to the transition period.

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At this week’s BoE meeting, policy makers Michael Saunders and Jonathan Haskel once again voted to cut rates, saying the central bank needed to move quickly to respond to signs that Britain’s robust job market was faltering.

For the seven others, it was too soon to take action. Economic growth was expected to pick up in early 2020 thanks to the easing of Brexit uncertainty, higher spending by the government and a recovery in global economic growth, they said.

“If global growth failed to stabilize or if Brexit uncertainties remained entrenched, monetary policy might need to reinforce the expected recovery in U.K. GDP growth and inflation,” the statement said.

But further ahead, the BoE said it might need to raise borrowing costs “at a gradual pace and to a limited extent” if those risks did not materialize and the economy grew as expected.

Last month the bank forecast Britain’s economy would grow by just 1.2 per cent next year, the weakest annual expansion since the global financial crisis. On Thursday it cut its forecast for quarterly growth in the final three months of 2019 to 0.1 per cent from 0.2 per cent.

The BoE said there were further signs that Britain’s recently booming jobs market was softening, but unit labour costs were still growing at a pace that could push up inflation by more than it wants. A small amount of excess supply had widened in the broader economy as companies were operating below full capacity.

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Inflation is currently running below the BoE’s 2-per-cent target at 1.5 per cent. But a handful of economists think the central bank could raise rates next year in response to underlying pressures from the tight labour market and damage to productive capacity from Brexit.

Most, though, say a rate cut is more likely and financial markets have been pricing in a roughly 50-per-cent chance of a single 25 basis-point rate cut before the end of 2020. That probability fell slightly after Thursday’s announcement.

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