BoE sees weakest UK growth in 10 years
london — The Bank of England said Britain faced its weakest economic growth in 10 years in 2019, blaming mounting Brexit uncertainty and the global slowdown, but it stuck to its message that interest rates will rise if a Brexit deal is done.
While other central banks have said they will hold off from raising borrowing costs, the BoE restated that gradual and limited rate rises lie ahead for Britain, as along as a no-deal Brexit in just 50 days’ time is averted.
“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, tensions for business,” BoE governor Mark Carney said in a speech after the bank’s policymakers voted unanimously to keep rates at 0.75 percent, as expected in a Reuters poll.
“Although many companies are stepping up their contingency planning, the economy as a whole is still not yet prepared for a nodeal, no transition exit.”
The 10-year British government bond yield fell to its lowest level so far this year at 1.158 per cent, down five basis points on the day, reflecting the BoE’s weaker outlook.
Sterling dipped a quarter of a cent against the dollar but quickly recouped those losses, leaving it at a two-week low of $1.2888. Short sterling interest rate futures indicated investors saw a flatter path ahead for interest rates.
“In the short term, the BoE is definitely more dovish,” James Smith, an economist with ING, said. “They are still subtly saying that their preference is to raise rates, but it all hinges on Brexit.”
The BoE previously said a worstcase Brexit scenario could hammer the economy more than the global financial crisis did. —