Economy

Romania's central bank maintains monetary policy rate at 2.5%

Romania's central bank maintains monetary policy rate at 2.5%”

The Bank of England (BoE) has warned that the United Kingdom is facing the weakest economic growth the country has seen in a decade, with the central bank blaming Brexit and the global slowdown, leading it to leave interest rates unchanged.

The Bank revised down the 1.7 per cent growth forecast it made in November to 1.2 per cent, making this the slowest rate of expansion since the recession of 2009.

Sterling had initially fallen after Governor of the Bank of England Mark Carney talked up the downside risks to growth posed by Brexit.

Mr Carney said: "When the economy is growing more slowly, the probability of it having a negative quarter or two goes up".

It might end up as a no-deal Brexit which would be bad for the United Kingdom economy, or it might be postponed and that would push uncertainty further down the road. "The economy needs a boost from lower interest rates, but in the meantime savers could look to capitalise on the current rates on offer from banks". The Government's regulations, as already enacted, are weakening the impact of the monetary policy, the central bank warned.

Sterling initially dipped a quarter of a cent against the dollar but rebounded after Carney's comments about the possibility of an economic rebound, trading largely unchanged on the day at $1.2925 by 1320 GMT.

The BoE saw a fall this year in business investment and housebuilding, which have been weak in the run-up to Brexit, as well as a halving of the growth rate in exports, reflecting the global slowdown.

Business investment will fall this year at the fastest pace in a decade as companies delay decisions and shore up their finances in the face of political uncertainty over Brexit, according to the Bank of England.

The cut in borrowing costs in Asia's third-biggest economy comes as the economy stutters and other central banks, most notably the Federal Reserve, have sounded increasingly cautious about the global outlook.

Ricky Knox, CEO of Tandem, says, "Consumers and investors are both uncertain about the British economy".

Although it did hold out the hope of a recovery later this year if an orderly deal is negotiated by the March deadline.

The MPC also trimmed its economic growth forecast, to 7.2-7.4 percent during April-September from its previous 7.5 percent estimate.

In its accompanying quarterly inflation report, the Bank outlined the volatility of its forecasts depending on the outcome of Brexit negotiations.

It said the United Kingdom economy is set to grow by just 1.2 percent this year instead of 1.7 percent as predicted just three months ago.

Economist James Smith at ING said: "The Bank is highly unlikely to tighten policy again through the first half of this year, and indeed the chances of a rate hike at all in 2019 have receded - although we think it's too early to write one off completely".

Assuming a smooth Brexit, policy makers reiterated that limited and gradual rate increases will be necessary.

India's retail inflation declined from 3.4 per cent in October 2018 to 2.2 per cent in December, well below the bank's target of four percent.



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