Economy

Sterling hovers near one-week low vs dollar ahead of BoE

Sterling hovers near one-week low vs dollar ahead of BoE”

Two Bank of England officials unexpectedly voted to lower interest rates to ward off an economic slowdown, and others said on Thursday they would consider a cut if global and Brexit headwinds do not lift.

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Also voted unanimously to maintain the stock of United Kingdom government bond purchases, financed by the issuance of central bank reserves, at £435B.

The Committee's new projections for activity and inflation are set out in the accompanying November Monetary Policy Report.

The BOE, which has frequently found itself drawn into the political fray around Brexit, said Thursday that its forecasts assume that a free-trade accord with the European Union would probably eliminate the need for tariffs on goods moving between the United Kingdom and European Union member states but would involve customs and regulatory checks that would add new friction to crossborder trade.

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"Now it's become possible that the picture in the UK could change, with the recent UK-EU withdrawal agreement creating the prospects for a pick-up in UK growth", Carney said. Officials said such an outcome would dispel some of the uncertainty now depressing business investment and consumer spending.

The minutes meanwhile noted "downside risks to the MPC's projections from a weaker world outlook and from more persistent Brexit uncertainties affecting corporate and household spending". Over the remainder of the forecast period, demand growth is expected to outstrip the subdued pace of supply growth, which is restrained to some extent by the adjustment to new trading arrangements with the EU. CPI inflation remained at 1.7% in September and is expected to decline to around 1¼% by the spring, owing to the temporary effect of falls in regulated energy and water prices.

The BoE's main task is use interest rates as a tool to keep 12-month United Kingdom inflation close to a government-set target of 2.0 percent. The 2022 growth rate is above Britain's long-term trend and would push inflation back above the BoE's 2% goal, the central bank said.

However, its latest dovish forecasts said rate-setters "may need to reinforce the recovery" - a huge hint of further stimulus - if global growth fails to recover and Brexit uncertainties "remain entrenched", threatening a fresh potential blow for.

They added: "For the majority of members of the committee, the existing stance of monetary policy was appropriate at this meeting".



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