The Latest on the Bank of England’s monetary policy decision and news conference (all times local):
Bank of England Governor Mark Carney is warning that the “fog of Brexit” is creating “a series of tensions” in the British economy.
In a news conference after the bank kept its main interest rate unchanged at 0.75 percent, Carney said it is likely that uncertainties “remain elevated for a while and that financial conditions stay tighter for longer.”
Although many companies have stepped up preparations for the possibility that Britain might crash out of the European Union on March 29 without a deal, Carney said the economy as a whole “is still not yet prepared for no deal, no transition exit.”
He said half the businesses surveyed by the Bank of England are “not ready for such a possibility” and that “on balance respondents expect U.K. output, employment and investment to contract substantially if it were to occur.”
The pound has dropped after the Bank of England slashed its forecasts for the British economy amid growing uncertainties over Britain’s exit from the European Union and weaker global growth.
While keeping its main interest rate at 0.75 percent, the Bank of England said Thursday that the U.K. economy is set to grow by just 1.2 percent this year instead of 1.7 percent as predicted just three months ago.
In its quarterly economic projections published alongside the rate decision, the bank predicted only one more quarter-point interest rate increase over the coming three years, to be carried out later this year. That’s a slower pace than previously thought.
Though some analysts think the bank is erring on the side of caution given the uncertainties surrounding Brexit, the pound fell to a 3-week low below $1.29.
Neil Wilson, chief market analyst for Markets.com, says it increasingly “seems that rates will remain anchored for the rest of the year.”
The Bank of England has slashed its forecasts for the British economy amid growing uncertainties over Britain’s exit from the European Union and weaker global growth.
While keeping its main interest rate at 0.75 percent, the Bank said the U.K. economy is set to grow by just 1.2 percent this year, far below the 1.7 percent predicted just three months ago.
If the economy were to in fact grow by that weaker rate, it would be the country’s worst performance since the 4.2 percent contraction in 2009 following the global financial crisis.
Bank of England rate-setters said the “outlook depended significantly on the nature of the EU withdrawal.”
Britain is due to leave the EU on March 29 but there’s no clarity as to how it will do so.