Bank of England cuts its growth forecasts for the UK

On their marks Unite members and workers in Carney masks picket the Bank’s head office in the City of London

The Bank of England has cut its economic growth forecast for this year and next, warning that households will see a fall in their real take-home pay this year and that output growth will remain below its normal expansion rate for some years. "Consequently the task of determining just what effect Brexit had on the United Kingdom economy will mostly fall on the shoulders of tomorrow's historians, rather than today's economists". The slower growth in the economy would mean that in the medium term, inflation will depreciate.

But he added: "Even a limited pick-up in growth is likely to have consequences for the stance of monetary policy". Perhaps some had seen the BOE raising rates.

Sterling fell by as much as 0.9 per cent against the euro during European trading, to 0.90487p. Shares rose and British government bond prices jumped.

The minutes from the MPC meeting reiterated that the central bank might be required to hike interest rates faster than the very gentle rising path suggested by the market yield curve.

THE BANK of England today cut its forecasts for the size of economy and warned that consumers face a continued squeeze on their income.

The assumption of a smooth Brexit will be tested.

His wary tone about Brexit prompted an angry response from a leading supporter of last year's Leave campaign.

He said the drop in sterling following the Brexit vote had fuelled inflation.

Still, it's not the first time NIESR have missed the mark with a forecast.

"The 6-2 vote was as expected, however, the dovish growth and inflation (forecasts were) a surprise to the markets", said Mizuho's head of hedge fund FX sales, Neil Jones. 'Perhaps the most interesting part of today's statement is the fact that the Bank still thinks investors are too cautious on the outlook for interest rates, ' he said.

But US bank Citi said the BoE was probably more anxious about the risks of a disorderly Brexit than it let show.

"The chances of a 2017 rate hike now look dead and buried", said Jake Trask, foreign exchange research director at OFX in London.

Asset purchase programs were left unchanged, and the bank lending scheme was announced to end on schedule in February 2018.

The MPC was split six-two over the decision as it seeks to meet its 2% inflation target. Inflation projections were slightly revised upwards for the current year to 2.7% on an annual basis from 2.6% before, while the central bank's expectations for annual inflation in 2018 remain at 2.6%.

Rates have now been held at 0.25% since last August, when they were reduced by 25bps amid market volatility after the Brexit vote. Recent figures showed the economy had its slowest growth since 2012 in the first half of this year, while inflation has also dipped and growth in wages remains weak. The BoE's 2017 United Kingdom growth forecast was revised lower, from 1.9% to 1.7%.

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