Home news Bank sees reduced risk of disorderly Brexit

Bank sees reduced risk of disorderly Brexit

15
0


The Bank of England has said it sees a reduced risk of a disorderly Brexit following the Prime Minister’s deal to secure trade talks with the EU.

The verdict of the Bank’s Monetary Policy Committee (MPC) was announced following its latest meeting to determine interest rates.
There was no policy shift as rates were unanimously kept at 0.5%, as economists had widely predicted, following the first increase in Bank rate for over a decade last month – aimed at combating rising inflation.
In its assessment of the UK economy, the MPC said the rate of inflation – confirmed at 3.1% on Wednesday – was “close to its peak” as it had previously forecast.
It has been driven up this year because the fall in the pound since the Brexit vote has driven up the cost of imported goods.

Video: Carney sees little rate rise strain

Those extra costs have, in turn, been passed on to businesses and consumers alike leaving households feeling the pinch particularly because wage growth has lagged behind inflation since last spring.
The MPC pointed to the likelihood of a hit to the economy because of the price pressure, saying it expected fourth quarter growth would be “somewhat below” the 0.4% achieved in the previous three months.
But it said confidence would be expected to rise – given progress in the Brexit process last week – that allowed talks to shift towards future trade arrangements.
The Bank said: “The Committee remains of the view that, were the economy to follow the path expected in the November Inflation Report, further modest increases in Bank rate would be warranted over the next few years, in order to return inflation sustainably to the target.

“Any future increases in Bank rate are expected to be at a gradual pace and to a limited extent.
“The Committee will monitor closely the incoming evidence on the evolving economic outlook, including the impact of last month’s increase in Bank rate, and stands ready to respond to developments as they unfold to ensure a sustainable return of inflation to the 2% target.”
Ben Brettell, senior economist at Hargreaves Lansdown, said it was a “fairly dull” update from the MPC.
He added: “As this Brexit-related uncertainty is almost certainly here to stay, I expect the Bank to proceed cautiously from here.
“Policymakers will naturally be keen to raise rates as fast as the economy allows, if only to provide some firepower when the next economic downturn arrives.

More from Business

“But with domestic inflationary pressures thin on the ground and Brexit casting its customary shadow, there’s no real imperative to move for some time.
“Markets are tentatively pricing in a further rise towards the second half of next year.”

Source: SKY