BoE Split Again On Rate; Trims Growth Outlook

BoE Split Again On Rate; Trims Growth Outlook

BoE Split Again On Rate; Trims Growth Outlook

About 15 staff members, some wearing facemasks of Governor Mark Carney, staged a picket outside the BoE's central London headquarters on Tuesday.

Given the uncertainties surrounding both the United Kingdom economic outlook - as a result of Brexit - and the BoE's position, markets could become quite volatile, particularly when the voting is released and during the press conference with Governor Mark Carney and some of his colleagues.

The timing of a rate hike has been complicated by the weakness in growth in the British economy.

Perhaps some had seen the BOE raising rates.

The pound hit a nine-month low against the euro and fell by more than a cent against the US dollar.

This was followed by gross domestic product figures showing growth was limited to 0.3% in the second quarter in what the Office for National Statistics described as a "notable slowdown" for the economy. This autumn, it is time for the government to act as well, both to reinforce business confidence and encourage investment.

Meanwhile, formal Brexit talks between the United Kingdom and the European Union have endured a somewhat bumpy start, leaving many firms anxious about the risk of a damaging divorce in 2019.

The MPC's forecasts are based on the assumption of a smooth exit from the European Union with Carney arguing it is in both sides' interests to have a clear transition to "whatever the end state is". It kept its 2019 forecast at 1.8 percent. At its meeting ending on 2 August 2017, the MPC voted by a majority of 6-2 to maintain Bank Rate at 0.25%.

Britain's pound hit $1.32 on Monday for the first time in over 10 months, as investors eyed this week's Bank of England "Super Thursday" for a steer on whether record-low interest rates could soon be lifted for the first time in more than a decade.

The central bank said the squeeze on consumers was likely to intensify further, and it cut its forecasts for future wage growth.

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But U.S. bank Citi said the BoE was probably more anxious about the risks of a disorderly Brexit than it let show. "The chances of a 2017 rate hike now look dead and buried", he added.

The Bank's quantitative easing programme was also left unchanged.

Speaking at an event organised by Fathom Consulting, Sir John highlighted that the Bank has already reversed measures implemented in the wake of the Brexit vote that were created to free up lending to the economy.

Caxton FX Currency Markets Analyst told the Daily Star Online: "Sterling fell against the euro and the dollar as the MPC voted 6-2 to keep rates on hold".

"When combined with the recent weakening in inflation, the effect has been to suggest that United Kingdom consumers could have a more enjoyable second half".

Currently, inflation is running at 2.6%, while wage growth is just above 2%, meaning that regular Brits are now bringing in less in wages than prices are growing, effectively lowering their real incomes.

Paper and packaging company Mondi was in the red as it reported a fall in first-half profit, mainly due to a significantly lower forestry fair value gain in South Africa and the impact of mill maintenance shutdowns.

And it expects GDP growth to fall back to 1.6 percent next year, down slightly on the previous expectation of 1.7-percent expansion.

It blamed the downgrade on Britain's stubbornly weak productivity and in part on the Brexit uncertainty. "CPI inflation was substantially above the target, and was projected to remain above the target throughout the three-year forecast period".

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