52885
Mark Carney
World Economy

BoE Forecasts Growth, Scraps Rate Cut Plan

The Bank of England scrapped its plan to cut interest rates, which it said could now move up or down, and raised its forecasts for 2017 growth and inflation sharply due to the slide in sterling since Britain’s vote to leave the EU.
The battered pound rose and British government bond prices fell after the BoE shifted to what Governor Mark Carney called “a neutral stance” on what its next move would be, Reuters reported.
The bank, which has faced political criticism for it’s near-zero rates, rethought its view on when Britain’s economy will feel the pain of June’s decision to leave the European Union.
In a set of forecasts on Thursday, it largely reversed its previous prediction of a major hit to growth next year which it now saw at 1.4%, up from an estimate of 0.8% made in August. That represented its biggest ever growth upgrade.
But it warned that Britain’s access to EU markets could be “materially reduced”, which would hurt growth over “a protracted period” and forecast a slower recovery for 2018 and 2019 as significantly above-target inflation squeezed living standards.
The BoE responded to the Brexit vote by cutting rates to a record low of 0.25% in August and reviving its bond-buying plan. It also said then that another rate cut was likely in 2016 if the economy slowed as it expected.
Critics, many of them Brexit supporters, accused Carney and his fellow policymakers of overstating the risks to the economy.
Asked by reporters about the big change to the 2017 growth forecast, Carney said in “broad-brush” terms the BoE was sticking to its view of the economy in three years’ time.

 Record Inflation Overshoot
The Bank said it now expected a record overshoot of inflation above its target over the next two to three years, peaking above 2.8% in early 2018, because of sterling’s recent fall to a 31-year low against the US dollar.
“There are limits to the extent to which above-target inflation can be tolerated,” the BoE’s Monetary Policy Committee said as it forecast inflation would jump to 2.7% this time next year, nearly triple its current level.
“Monetary policy can respond, in either direction, to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.”
Inflation was only expected to return to 2% in 2020.
But economists doubted the bank would raise rates soon. “We don’t think there is any material probability of a bank rate hike in the foreseeable future,” RBC’s Sam Hill said.

 

Short URL : https://goo.gl/D4Uh47
  1. https://goo.gl/K6txbB
  • https://goo.gl/IYHYm7
  • https://goo.gl/D7kClE
  • https://goo.gl/HvX9oj
  • https://goo.gl/1NXhK1

You can also read ...

Bithumb Hacked, $32m in Cryptocurrency Stolen
Cryptocurrencies dropped after the second South Korean...
South Africa GDP Shrinks
South African gross domestic product shrank 2.2% in the first...
Washington in March imposed tariffs of 25% on steel and 10% on aluminum, in a move mainly aimed at curbing imports from China.
Russia said on Tuesday it would impose import duties on US...
Saudi Arabia, which employs about two-thirds of its citizens, is chipping away at a budget deficit that ballooned to almost 16% of GDP after the oil shock of 2014, while FDI slumped more than 80% last year.
Show up, swipe in. The routine is familiar to office workers...
Australian Telecom Co. to Axe 8,000 Jobs
Australia’s dominant telecommunications company Telstra...
Taxes in Italy Drive Economy Underground
Italy grew rapidly over the 20th century, and its black market...
South Korea to Grow 3 Percent
The Organization for Economic Cooperation and Development has...
World Shares Snap Five-Day Losing Streak
World stocks steadied near three-week lows on Wednesday and...

Add new comment

Read our comment policy before posting your viewpoints

Trending

Googleplus