ZCZC
BCN-10
BRITAIN-GROWTH-RATE-FOREX-BOE
Bank of England slashes UK growth outlook over ‘fog of Brexit’
LONDON, Feb 8, 2019 (BSS/AFP) – The Bank of England on Thursday slashed
its forecast for UK growth this year to 1.2 percent from 1.7 percent, blaming
the downgrade on a global economic slowdown and “the fog of Brexit”.
“UK economic growth slowed in late 2018 and appears to have weakened
further in early 2019,” the BoE said after keeping its main interest rate at
0.75 percent.
“This slowdown mainly reflects softer activity abroad and the greater
effects from Brexit uncertainties at home,” it added.
Bank of England governor Mark Carney warned that Britain was “not
prepared” for a no-deal Brexit.
“Although many companies are stepping up their contingency planning, the
economy as a whole is still not yet prepared for a no-deal no-transition
exit,” Carney told a press conference to elaborate on the BoE’s latest
forecasts.
“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,” he added.
The European Union and Britain agreed to hold further talks to try and
save their Brexit deal, after May met European Commission head Jean-Claude
Juncker in Brussels on Thursday.
Plans for Britain to leave the EU on March 29 under a withdrawal agreement
signed last year were thrown into doubt when British lawmakers overwhelmingly
rejected the accord last month.
Meanwhile should British GDP come in at 1.2 percent, it will be the
country’s weakest output in a decade.
In November the BoE had forecast 2019 growth of 1.7 percent.
“Brexit uncertainties had intensified considerably since the Committee’s
November meeting,” the BoE said Thursday.
“The economic outlook will continue to depend significantly on the nature
of EU withdrawal,” it added.
The BoE also slashed its forecast for 2020 UK growth — to 1.5 percent
from 1.7 percent.
MORE/HR/0933
ZCZC
BCN-11
BRITAIN-GROWTH-RATE-FOREX-BOE 2 LAST LONDON
The downgrades sent the pound sinking under $1.29, while the euro
rebounded close to 88 pence.
“The pound has dropped to its lowest (dollar) level in almost three
weeks… although it should be stated that the market reaction is fairly
muted,” noted XTB analyst David Cheetham.
– Global slowdown –
Output in Britain’s dominant service sector almost ground to a halt in
January, data showed this week.
The IHS Markit/CIPS UK services purchasing managers’ index (PMI) fell to
50.1 — the lowest level in two and a half years — down from 51.2 a month
earlier.
A PMI reading above 50 indicates growth.
Concerns about Britain’s impending departure from the EU dampened demand
and caused firms to delay making decisions on new projects.
The news followed disappointing PMI readings for the manufacturing and
construction sectors in January.
Britain is meanwhile not alone in experiencing a cooling economy.
The European Commission on Thursday sharply cut its 2019 eurozone growth
forecast on an unexpected slowdown in Germany and protests in France.
In the US, the Federal Reserve last month left its key lending rate
unchanged and said it would be patient about making any further changes, in a
clear signal that the central bank has heeded concerns about the economy.
A slowdown to China’s economy has also rattled markets in recent months.
BSS/AFP/HR/0935