Bank of England slashes growth forecasts amid Brexit and global trade disputes
The Bank of England downgraded its growth forecasts on Thursday in response to Brexit uncertainty and ongoing trade disputes that threaten to slow the global economy.
The Bank of England (BoE) slashed its growth forecast on Thursday amid Brexit uncertainty and ongoing global trade disputes that threaten to stall global economic expansion.
However, the BoE did not say that it plans to lower interest rates to support the UK economy, unlike other central banks.
‘All eyes will be on the MPC’s September meeting,’ Chief Economist at the Institute of Directors Tej Parikh said.
‘If a disorderly exit from the EU is on the cards, the Bank must not shy away from lowering interest rates in advance to support businesses and households through the turbulence.
‘Waiting until after the fact could lower the impact of any action taken,’ he added.
US Federal Reserve lowers interest rates
Unlike the BoE, the US Federal Reserve opted to reduce interest rates for the first time since the global financial crisis over a decade ago.
Meanwhile, the BoE reiterated that it still plans to raise rates slowly over time, but only it the global economy remains stable and the UK can leave the EU with a ‘smooth’ Brexit.
‘Profound uncertainties over the future of the global trading system and the form that Brexit will take are weighing on UK economic performance,’ Bank of England Governor Mark Carney said after the announcement on Thursday.
“Until they are resolved, shifting perceptions of these factors will drive volatility in market interest rates, equity prices and currencies’ values,’ he added.
BoE opts to leave rates unchanged despite challenging outlook
The BoE’s Monetary Policy Committee (MPC) voted 9-0 in favour of leaving interest rates unchanged, adding that in the event of a no-deal Brexit it would not inevitably reduce the cost of borrowing.
‘Underlying growth appears to have slowed since 2018 to a rate below potential, reflecting both the impact of intensifying Brexit-related uncertainties on business investment and weaker global growth on net trade,’ the BoE said.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
See an opportunity to trade?
Go long or short on more than 16,000 markets with IG.
Spread bet and trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.