{"id":9480,"date":"2023-11-04T06:45:18","date_gmt":"2023-11-04T06:45:18","guid":{"rendered":"https:\/\/infundpros.com\/business\/bank-of-england-downgrades-forecasts-for-uk-economic-growth\/"},"modified":"2023-11-04T06:45:19","modified_gmt":"2023-11-04T06:45:19","slug":"bank-of-england-downgrades-forecasts-for-uk-economic-growth","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=9480","title":{"rendered":"Bank of England downgrades forecasts for UK economic growth"},"content":{"rendered":"
\n

\n The Bank of England downgraded its forecasts for UK economic growth Thursday and kept interest rates unchanged, even as it warned that the Israel-Hamas war could push up energy prices and inflation won\u2019t return to target for another two years.\n <\/p>\n

\n The central bank now expects gross domestic product to have flatlined in the July-to-September quarter and to grow just 0.1% in the current quarter, marking <\/strong>gloomier forecasts than its projections in August.\n <\/p>\n

\n \u201cThere are increasing signs that higher interest rates are weighing on economic activity and we see that in weaker activity data and in a range of business surveys,\u201d Governor Andrew Bailey told reporters.\n <\/p>\n

\n The bank, which stopped raising rates in September after 14 successive hikes, thinks more than half of the impact of higher borrowing costs on GDP is still to hit the economy, which suggests that growth could slow even more sharply.\n <\/p>\n

\n Despite the economic slowdown, the Bank of England <\/strong>sees inflation returning to its 2% target only at the end of 2025, roughly six months later than previously forecast.\n <\/p>\n

\n \u201cLet me be clear, there is absolutely no room for complacency. Inflation is still too high,\u201d Bailey said, also pointing to the risk that the Israel-Hamas war could lift energy prices.\n <\/p>\n

\n Although the central bank <\/strong>kept interest rates unchanged for the second time in a row, it <\/strong>did not rule out further rate hikes and said rate cuts were not yet on the table. Six members of the monetary policy committee voted to hold rates, while three voted for a 0.25-percentage point increase.\n <\/p>\n

\n The decision keeps the main borrowing cost for commercial banks in the United Kingdom at 5.25%. That is the highest level since February 2008.\n <\/p>\n

\n \u201cWe will be watching closely to see if further increases in interest rates are needed\u2026 it is much too early to be thinking about rate cuts,\u201d Bailey said.\n <\/p>\n

\n \u201cWe will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target,\u201d he added.\n <\/p>\n

\n The Bank of England\u2019s decision mirrors that of the Federal Reserve, which also kept rates on hold\u00a0Wednesday. The European Central Bank, for its part, paused its rate-hiking campaign for the first time in 15 months last week.\n <\/p>\n

\n All three central banks pointed to a further slowdown in economic activity, as higher borrowing costs dampen demand.\n <\/p>\n

\n The Bank of England expects inflation to continue easing, but warned of risks to that outlook.\n <\/p>\n

\n UK consumer prices increased 6.7% in September compared with a year earlier, at the same rate as in August when inflation unexpectedly eased. Food prices notched their first monthly decline in two years in September, according to the Office for National Statistics. But energy prices fell at a much slower annual pace than in August.\n <\/p>\n

\n The Bank of England thinks inflation will slacken below 5% in October and remain around that level for the rest of the year.\n <\/p>\n

\n That will come as good news to UK Prime Minister Rishi Sunak, who has promised to halve inflation this year to around 5% as one of his five main <\/strong>pledges to voters.\n <\/p>\n

\n But Bailey cautioned that risks to inflation remained on the \u201cupside.\u201d He pointed to strong pay growth, stubborn services inflation and the Israel-Hamas war, which threatens higher energy prices. \u201cSo far that hasn\u2019t happened and that\u2019s obviously encouraging, but the risk remains there,\u201d he added.\n <\/p>\n

\n In contrast to Bailey\u2019s remarks, Martin Beck, chief economic adviser to the EY ITEM Club, said there could in fact <\/strong>be more \u201cdownside surprises\u201d to inflation in the coming months. He pointed to outright falls in producer prices and contracting money supply.\n <\/p>\n

\n \u201cGrowth in credit to the private sector has slowed to a crawl and the economy appears to be increasingly feeling the impact of the past rises in interest rates, with, at best, a period of stagnation likely over the next few quarters,\u201d he said.\n <\/p>\n<\/p><\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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