{"id":5671,"date":"2018-12-20T15:22:09","date_gmt":"2018-12-20T15:22:09","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/bank-cuts-growth-forecast-amid-brexit-worries\/"},"modified":"2018-12-20T15:22:09","modified_gmt":"2018-12-20T15:22:09","slug":"bank-cuts-growth-forecast-amid-brexit-worries","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/bank-cuts-growth-forecast-amid-brexit-worries\/","title":{"rendered":"Bank cuts growth forecast amid Brexit worries"},"content":{"rendered":"\n
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The Bank of England has cut its UK growth forecast and warned a lack of Brexit clarity is hitting the economy.<\/p>\n

The Bank said uncertainty over the UK’s departure from the EU had “intensified considerably” over the past month.<\/p>\n

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

It said the economy was likely to grow by 0.2% in the final quarter of 2018, down from an earlier forecast of 0.3%.<\/p>\n

That follows growth of 0.6% in the previous quarter.<\/p>\n

The Bank expects slower economic growth to continue into 2019.<\/p>\n

What next for rates?<\/h2>\n

The Bank of England last raised interest rates in August to 0.75%, but has been reluctant to push them higher while uncertainty remains over Brexit.<\/p>\n

But if there is a deal, economists say the Bank is likely to make a move.<\/p>\n

“We continue to think that the MPC won’t wait for signs of a recovery to emerge in the data and will raise Bank Rate to 1.0% in May,” said Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.<\/p>\n

Paul Dales, Chief UK Economist at Capital Economics, sees a sharp increase in rates, if there is a “smooth” Brexit outcome.<\/p>\n

“Our money is currently on a faster rebound in GDP growth prompting the Bank to raise rates by 0.25% three times next year and two more times in 2020,” he said.<\/p>\n

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.<\/p>\n

Commercial bank funding costs had also “risen sharply”, the Bank noted, which could push up consumer borrowing costs.<\/p>\n

The Bank said the outlook for pay was brighter, with wages growing faster than policymakers expected in November.<\/p>\n

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.<\/p>\n

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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 2019. <\/p>\n

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.<\/p>\n

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

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”.<\/p>\n

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Analysis:<\/h2>\n

By Andy Verity, BBC economics correspondent<\/strong><\/p>\n

In the latest from the Bank of England’s interest rate setters, it’s not what they did that’s eye-catching – interest rates stayed the same. <\/p>\n

It’s what they said. <\/p>\n

Some of it you already knew. “Brexit uncertainties have intensified considerably since the last meeting.” <\/p>\n

You probably also knew sterling has depreciated further and is more volatile. <\/p>\n

What you might not have known is that it’s costing banks more to fund themselves – i.e. to borrow cash – and it’s also costing corporations more in interest to borrow funds from international investors. <\/p>\n

Businesses are investing less and it’s likely to stay that way for months. <\/p>\n

The MPC has cut its forecast of economic growth for the fourth quarter of 2018 from 0.3% to 0.2%. And while inflation may dip below 2% in the coming months, beyond that inflation expectations are higher based on higher pay rises. <\/p>\n

Assuming a smooth Brexit, “an ongoing tightening of monetary policy [rises in interest rates]\u2026 at a gradual pace and to a limited extent, would be appropriate”.<\/p>\n

But these days that assumption is in serious doubt – and rates may have to be cut. <\/p>\n

To those who accuse the Bank of England of exaggerating the potential harm of a no-deal Brexit, the message is clear. “Bah, Humbug!”<\/p>\n

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Source<\/a> by [author_name]<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Bank of England has cut its UK growth forecast and warned a lack of Brexit clarity is hitting 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 … <\/p>\n","protected":false},"author":0,"featured_media":5672,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-5671","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/5671","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=5671"}],"version-history":[{"count":0,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/5671\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media\/5672"}],"wp:attachment":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=5671"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=5671"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=5671"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}