Bank of England holds rates for another month, but cuts growth forecasts

Chelsea West
August 6, 2017

The Bank slashed its economic growth forecasts for 2017 to 1.7% from 1.9% and lowered next year's estimate to 1.6% from 1.7%.

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Following the bank's announcement, sterling dropped nearly 1 per cent against the United States dollar to $1.31.

The British bank rate has been at 0.25 percent since August previous year, a record low set with a 25 basis point cut to bolster the economy in case of blowback from the Brexit referendum decision.

Significantly, he added that Bank was not excessively concerned about the level of British households' debt, as the ratio of consumer credit to incomes continued to be much lower than before the financial crisis.

"We think that would be insufficient relative to what would be required to fulfill our mandate", Mr.

The Bank kept rates on hold at 0.25% as Britons suffer amid a tightening squeeze on incomes from soaring prices.

The Bank of England are increasingly facing pressure to raise rates, after the US Federal Reserve chose to hike theirs.

Investors hoping for the Bank of England (BoE) to hint at a more hawkish tone on monetary policy were disappointed yesterday, as the BoE seemed notably more dovish.

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In a statement, the committee forecast weak sterling would continue to boost consumer prices without "adverse consequences for inflation expectations" and that pay growth would pick up after several more months of modest increases.

He said Britain is now in "a little bit" of a better position for a core rate rise. And it has consistently stressed that as a result, the implications for monetary policy would not be automatic.

Aberdeen Asset Management chief economist Lucy O'Carroll says Brexit is at the core of every aspect in the Bank of England's inflation report.

British inflation is being supported by a Brexit-fuelled slump in the pound pushing up import costs - although the annual rate managed a slowdown to 2.6% in June from a near four-year high of 2.9% in May.

That's down from three votes for a rise at the last meeting, with Kristin Forbes, who voted for a rise in June, having left the MPC.

The BOE said it expects the United Kingdom economy to expand 1.7% in 2017, a weaker pace than the 1.9% it forecast in May. Carney, however, still expected investment levels to be relatively weak. Officials expect higher exports to offset some of that softness.

In a sign of businesses' concerns, the Institute of Directors said on Friday that the United Kingdom should delay leaving the European Union past the March 2019 deadline for divorce talks if all trade areas aren't resolved.

Brexit uncertainty "weighs on the decisions of businesses and households, and holds down both demand and supply", Carney told reporters after the bank released its quarterly review of economic trends.

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