Bank of England has announced that uncertainty over Brexit is affecting Britain’s economy in a negative manner so it has no other option but to cut national growth forecast. Due to weak global growth the Monetary Policy Committee (MPC) has voted to keep interest rates at 0.75 %and said that economy will grow by 0.2 %in last quarter of 2018 down from earlier forecast of 0.3 %. The growth in previous quarter was 0.6% but the bank said that uncertainty over Brexit has intensified in the last couple of months as government seems to have taken little steps to allay fears of people about how the situation will be managed after 31st March 2019.
The bank stated that the slow economic growth will continue through 2019 and though it raised interest rates in August this year to 0.75 percent it is not likely to push it up again until the Brexit issue is sorted out. UK’s chief economist Samuel Tombs has stated that if there is a deal then MPC will not wait for recovery signs and will immediately increase bank rate to 1.0 percent by May next year. Experts say that Bank of England will most probably raise interest rates by 0.25 percent around three times next year and probably two times in 2020.
Government’s decision to avoid taking a vote on Brexit deal has dragged down share prices in the country’s bourses and also led to fall in value of national currency. Funding costs of commercial bank have also risen sharply that could push up borrowing costs of consumers. The Bank stated that wages in UK are growing at a rapid pace so its outlook is likely to be quite bright. Low oil prices are likely to push UK’s inflation below the Bank’s predicted target of 2 percent and experts say that it will remain at that level till the start of 2019.