Bank of England surprises as two officials back rate cut

November 07, 2019, 11.01 PM | Source: Reuters
Bank of England surprises as two officials back rate cut

ILUSTRASI. Some of the artwork details are seen on a large scale sample of the new twenty pound note during the launch event at the Turner Contemporary gallery in Margate, Britain, October 10, 2019. Leon Neal/Pool via REUTERS


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Saunders and Haskel noted reduced job vacancies that suggested Britain’s hitherto strong labor market was turning as well as risks from the world economy and Brexit.

Other MPC members showed a new openness to cutting rates if things soured. They also softened their language on the need for limited and gradual rate hikes in the medium term, saying they “might” rather than “would” be necessary.

The BoE as a whole painted a darker picture for Britain’s economy over the next three years, predicting it will grow 1% less over the period than it had forecast in August, mostly due to a weaker global economy and a recently stronger pound.

But part of the growth downgrade reflected Johnson’s Brexit plans.

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The BoE now assumes Britain will strike a trade deal that leads to new customs checks and puts up barriers to exports of financial and legal services.

The growth forecast would have been weaker still without higher spending announced by the government in September which the BoE said would add 0.4% to the economy.

Inflation, currently 1.7%, is forecast to drop to 1.2% in the middle of next year due to lower oil prices and regulatory caps on electricity and water bills.

But over the next couple of years, the BoE sees economic growth picking up from 1.4% in 2019 to 2.0% in 2022. 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.

Editor: Tendi Mahadi

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