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September 6, 2019
Bank cuts growth forecast amid Brexit worries

Bank cuts growth forecast amid Brexit worries

Bank of England

The Bank of England has cut its forecast for UK growth and warned that a lack of Brexit clarity is weighing on the economy.

The Bank said uncertainty over the UK’s departure from the EU had “intensified considerably” over the past month.

Against a backdrop of weaker global growth, the Monetary Policy Committee (MPC) voted unanimously to keep interest rates at 0.75%.

It said the economy was likely to grow by 0.2% in the final quarter of 2018.

That follows growth of 0.6% in the previous quarter.

Bank staff had previously predicted growth of 0.3% for the final quarter.

The Bank expects slower economic growth to continue into 2019.

Pay boost

The UK government’s decision to abandon a vote on the Brexit deal last week dragged down UK share prices and triggered a drop in the value of the pound.

Commercial bank funding costs had also “risen sharply”, the Bank noted, which could push up consumer borrowing costs.

The Bank said the outlook for pay was brighter, with wages growing faster than policymakers expected in November.

Measures announced in the Budget at the end of October, including a multi-billion pound funding boost for the NHS, would lift growth by 0.3% over the next few years, the Bank said.

Lower oil prices were likely to push inflation below the Bank’s 2% target by the end of the year. Policymakers expect inflation to remain there into the start of 2017.

A separate Bank survey suggested that business services firms, including law and accountancy companies, believed activity could slow “sharply” in the event of a no-deal Brexit.

The survey also indicated that Black Friday sales had “failed to meet many retailers’ expectations” as cautious consumers kept spending down ahead of Christmas.

While business surveys suggest weak growth in the months ahead, the Bank noted that it was “it was possible that these surveys might be overstating the extent of any slowing”.

Source BBC News

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