The Bank of England looks set to trim its forecasts for Britain’s already sluggish growth on Thursday, reflecting the approach of a still uncertain Brexit in just 50 days’ time and a slowdown in many of the world’s big economies.
But the BoE is also likely to strike a contrasting note to the U.S. Federal Reserve by reminding investors that it still intends to raise interest rates, if Britain can avoid the shock of an abrupt no-deal departure from the European Union.
With a transition deal still not in the bag, the BoE’s rate-setters are expected to vote unanimously to keep their benchmark borrowing rate at 0.75 percent, according to a Reuters poll of economists.
“The Monetary Policy Committee (MPC) is clearly in ‘wait and see’ mode,” Howard Archer, an economist with EY Item Club, a forecasting firm, said.
Prime Minister Theresa May is pushing for concessions from EU leaders on a key part of the divorce she agreed with them last year, maintaining the prospect of a no-deal Brexit on March 29. Even so it would be a big surprise if bank Governor Mark Carney and his colleagues change their message that they intend to resume raising rates once Britain has negotiated Brexit.
It also said it expected Britain’s economy would grow by 1.7 percent a year in 2019, 2020 and 2021, a forecast it might trim, given the signs of a global slowdown since then.
If Britain leaves the EU without a deal, the BoE has said it might raise rates due to the inflationary impact of a likely slump in the value of the pound, although most economists think it would cut them to cushion the blow to the economy.
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