BoE braces for Brexit

Mark Carney has warned the real uncertainty over the UK’s decision to leave the European Union is still ahead and that the Bank of England (BOE) will need to respond accordingly.

“The Brexit journey is really just beginning – while the direction of travel is clear, there will be twists and turns along the way,” the BOE governor told a press conference in London on Thursday. He said that with inflation accelerating and risks to growth on the horizon, “we can see scenarios in either direction” for policy.

The BOE upgraded its economic forecasts for the second time since the Brexit vote while revealing that some policymakers have become more concerned about accelerating inflation. The revised outlook follows stronger-than-expected growth and reflects an easier fiscal stance, buoyant consumer spending and an improving global environment.

The monetary policy committee now sees gross domestic product rising 2% this year, up from 1.4% in November.

This saw rate setters repeat that they have limited tolerance for inflation above 2%. Some members went further and said they are “closer to those limits”. Inflation is forecast to accelerate and peak at 2.8% in 2018.

The BOE left its key rate at a record-low 0.25% and its bond-purchase programmes unchanged.

"If we do see faster growth, one can anticipate an adjustment of interest rates,” Carney said. – Bloomberg