UK central bank cuts 2017 growth forecast only slightly, warns wages not keeping up with higher inflation means difficulty for British households.
ADVERTISEMENTThe head of the UK’s central bank Mark Carney has said Britain should enjoy solid economic growth through to the end of the decade, but only if the government achieves a smooth departure from the European Union.
The Bank of England (BoE) trimmed its forecast of growth this year to 1.9 percent from 2.0 percent, but nudged up its forecasts for 2018 and 2019 to 1.7 percent and 1.8 percent. Last year Britain’s economy grew 1.8 percent.
Carney said the BoE had not made forecasts based on the scenario of a “disorderly Brexit” where Britain crashes out of the EU without an agreement on future relations.
The bank’s stimulus measures and borrowing costs were left unchanged.
MPC holds #BankRate at 0.25%, maintains government bond purchases at £435bn and corporate bond purchases at up to £10bn. pic.twitter.com/vPlTLdPDnD
— Bank of England (@bankofengland) 11 May 2017
Challenging time
Governor Carney also warned things will be difficult for British households this year as higher inflation linked to Brexit will cut people’s purchasing power.
He told reporters: “This is going to be a more challenging time for British households over the course of this year. Real income growth, to use our terminology, will be negative. To use theirs, wages won’t keep up with prices for the goods and services they consume.”
Carney said inflation would be near 3.0 percent this year but added it was important to put that into the context of a UK economy that was still growing and employing a record number of people.
He expects real wage growth to eventually pick up to 3.5 percent next year from around 2.0 percent at present as businesses find it harder to recruit staff, but added there would be “consequences” if it does not.
Inflation will continue to rise above the 2% target. #InflationReport#SuperThursdaypic.twitter.com/x7qchLdTUz
— Bank of England (@bankofengland) 11 May 2017
Pound falls as #MarkCarney says that he expects #Brexit to be“smooth”.
Markets don't believe it.#BankofEnglandpic.twitter.com/XzDGrLGeBm— Bonnie Greer (@Bonn1eGreer) 11 May 2017
