Wednesday, 24 April, 2019

Pound plummets as Bank of England warns about Brexit uncertainty

The Bank of England has slashed this year's growth forecast to 1.2 per cent- the lowest since 2009 The Bank of England has slashed this year's growth forecast to 1.2 per cent- the lowest since 2009
Priscilla Morrison | 09 February, 2019, 16:30

"Governor Das" remark that "there is room to cut' suggests this is not a one and done easing", said Radhika Rao, economist at DBS Bank.

The Reserve Bank of India (RBI) said the benchmark repo rate - the level at which it lends to commercial banks - would be reduced by 25 basis points to 6.25 per cent.

Britain is scheduled to leave the European Union on March 29, with May heading back to Brussels in an attempt to gain concessions from European Union officials with the aim of garnering support for her deal in parliament and avoiding a no-deal Brexit.

Carney said "not everything may be tied up in a nice package" by Brexit day.

Carney said, "When the economy is growing more slowly, the probability of it having a negative quarter or two goes up". The Federal Reserve has changed direction, and now many analysts expect no U.S. rate hikes this year, after four in 2018.

"The fog of Brexit is causing short term volatility in the economic data and more fundamentally it is creating a series of tensions in the economy". "They are still subtly saying that their preference is to raise rates, but it all hinges on Brexit". Whilst rates remain unchanged and growth is lagging, customers are encouraged to lock away money in competitive savings products.

The central bank reduced its 2019 economic growth forecast to 1.2%, down from its earlier estimate of 1.7% that it made in November past year.

Governor of the Bank of England Mark Carney
Governor of the Bank of England Mark Carney

"If there is a lot of (government) pressure, then I may cut by a notional 5-10 basis points", said the head of a big state-run bank who asked for anonymity due to sensitivity of the subject.

The BoE sees business investment and housebuilding falling this year and a halving of the growth rate in exports.

The MPC also trimmed its economic growth forecast, to 7.2-7.4 percent during April-September from its previous 7.5 percent estimate.

Ben Brettell, Senior Economist, at Hargreaves Lansdown said: "Nobody thought for a minute that interest rates would change, so any intrigue was always going to come from the accompanying minutes and forecasts".

Nevertheless, the forecasts suggested that just one more quarter-point hike would be needed in the next three years to return inflation to close to the 2 per cent target, down from nearly three hikes seen in November. It additionally means policymakers on the central bank now count on Britain to develop at its slowest tempo because of the global monetary disaster.

The year over year change in consumer price inflation dropped from 3.4 percent in October to 2.2 percent in December, its lowest level in eighteen months. For 2020, general financial development is predicted to sluggish to 1.5 p.c, from 1.7 %.

Business investment will fall this year at the fastest pace in a decade as companies delay decisions and shore up their finances in the face of political uncertainty over Brexit, according to the Bank of England.

More news: Amazon might be reconsidering its second headquarters in NY

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