A member of the Bank of England's Monetary Policy Committee Gertjan Vlieghe has said a rate hike in the short term is unnecessary. In addition, last month only one of the nine members voted to raise rates, this shows that the Committee seems to commonly agree on not raising rates in the short term. The financial markets expect that this year will be a year of central banks' increasing rates in a global scale. However, Vlieghe suggests that the financial markets have overestimated the probability of rate hiking. It is very reasonable for the Bank of England not to raise rates this year.
Britain just triggered Article 50 to officially start its Brexit process and this would lower the potential investment in the UK from domestic as well as foreign investors, especially when some companies are deciding to move their European head offices out of Britain. Investment is an important sector in an economy and Britain is no exception. Increasing base rates could drag down investment as borrowing becomes more expensive. In addition, increasing base rates will also be likely to make its currency appreciate against other currencies. This could reduce the British exports and increase the British imports. When the future trade deal between Britain and the European Union after Brexit is still uncertain, it is reasonable to stabilise the current exchange rate. Moreover, it is also to reduce all kinds of potential risk as much as possible. Rate hike potentially increases the risk of the British economy, given it could bring the changes I just mentioned.
When an economy faces large future risks, they tend to make fewer changes in other sectors which do not directly relate the main risk factor in order to control the systematic risk as much as possible.
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