The pound took a dive in today’s trading session after the latest interest rate decision and monetary statement from the Bank of England regarding expected growth for the UK in the year ahead.
The BOE kept rats on hold as the market expected at 0.75 percent but it was the following statement the aught everybody off guard with the bank downgrading Britain's forecast for 2019 growth to 1.2 percent which is much lower than the 1.9 percent forecasted earlier and the weakest since the financial crisis in 2009.
The central bank noted in their statement that uncertainty surrounding Brexit as the likely cause of the issues which has filters through to consumers and businesses alike
“Key parts of the EU withdrawal process had remained unresolved and uncertainty had intensified. Businesses had appeared increasingly to be responding to Brexit-related uncertainties and there were some signs that those uncertainties might also be affecting households’ spending and saving decisions.” The bank said
This news sent the pound tumbling and adds another headache for the British economy which comes on the top of all the woes surrounding Brexit and whether the UK will crash out of the EU in March without a deal.
The reason the pound didn’t fall much lower analysts say is that the hope of a deal being reached is still lingering and with such dovish news from the BOE, the chances of a no deal should be removed all together
“It’s now crunch time – a no-deal scenario must be taken off the table because the economy is seizing up from uncertainty. The Bank’s forecasts, when put together with recent business surveys, illustrate the harmful impact on the economy the longer that this goes on. Said Rain Newton-Smith, Chief Economist from CBI
“Brexit uncertainty has kept interest rates on hold this month, and the near-term outlook for the UK economy is also weaker. However, in the event of a smooth Brexit, the Bank expect a lift to economic growth and business investment further ahead, as greater clarity unlocks pent-up demand.”
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