Bank of England trims growth outlook, holds rates as Brexit looms
Updated 22:18, 04-Nov-2018
The Bank of England on Thursday trimmed its growth forecasts due to Brexit uncertainty and froze interest rates – but warned it could alter monetary policy "in either direction" after Britain quits the European Union next year.
The central bank's nine-strong Monetary Policy Committee (MPC) all voted at a regular policy meeting to keep the central bank's key rate on hold at 0.75 percent, it announced in a statement.
The BoE, detailing its latest quarterly forecasts alongside the rate decision, predicted the economy will expand by 1.3 percent this year, downgrading prior guidance of 1.4 percent given in August.
Gross domestic product (GDP) was then predicted to expand by 1.7 percent in 2019, the year in which Britain will leave the European Union. That was down from 1.8 percent forecast previously.
The forecasts are based on the assumption of a smooth transition period, but there is growing unease on markets about a potentially chaotic no-deal Brexit amid stalled talks between Brussels and London.
"The economic outlook will depend significantly on the nature of EU withdrawal, in particular, the form of new trading arrangements, the smoothness of the transition to them and the responses of households, businesses and financial markets," the BoE said.
"The implications for the appropriate path of monetary policy will depend on the balance of the effects on demand, supply, and the exchange rate."
"The MPC judges that the monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction.
"At this meeting, the MPC judged that the current stance of monetary policy remained appropriate."
The BoE news comes just days after the UK government ramped up its 2019 growth outlook to 1.6 percent, from 1.3 percent.
But Britain's Chancellor of the Exchequer Philip Hammond also cut his 2018 growth guidance to 1.3 percent from 1.5 percent in his annual budget statement on Monday.
Hammond confirmed this week that a disorderly Brexit would spark a new budget sooner than expected.
Britain is scheduled to leave the EU at the end of March 2019.
Source(s): AFP