Many economists say a British exit from the EU (Brexit) – the world’s biggest single market – would hurt trade and growth. Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise’.
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He is likely to face questions at his so-called Super Thursday conference over the possibility of a cut in interest rates, following recent reports that the Bank asked banks to prepare for a reduction in rates in the event of a Brexit vote.
The UK economy saw slower growth in the first quarter, and the Bank of England anticipates that there will be decelerated economic growth in Q2 2016. With the threat of voters choosing to leave the bloc looming, macroeconomic and financial market indicators are “less informative than usual”, BOE Gov. Mark Carney said in a report today.
Once Norges Bank opted to hold the official cash rate the Norwegian Krone strengthened versus the majority of its closes rivals.
While Mr Carney stressed that the Bank would take “whatever action is needed” to stabilise the economy, he added its ability to control the fallout would be limited, adding: “Monetary policy can not immediately offset all the effects of a shock”.
Mark Carney, BOE governor told the press that “A vote to leave the European Union could have material effects on the exchange rate, demand and supply potential”. It also pushes up the cost of imports, which can lead to higher prices overall. Growth is projected to recover later this year, “but to rates that are a little below their historical average”.
The forecast for consumer price inflation for the second quarter of this year was unchanged at 0.4 percent but lowered to 1.5 percent for Q2 2017 from a previous forecast of 1.6 percent.
At 7.00 am ET, the Bank of England is scheduled to publish interest rate decision and the minutes.
The year 2016 was supposed to be the year when rate rises came through with a degree of regularity.
The central bank also cut Britain’s growth forecast for this year to 2.0 percent from 2.2 percent in February, reflecting how uncertainty about next month’s referendum is already weighing on the economy.
“The main message for business from the inflation report is that while the current interest rate policy will be conducive to maintaining stability, much greater efforts will be needed on the part of the government to boost growth at a time when circumstances will remain hard”.
The market will also study the report to see if the MPC is concerned the slowdown in the economy is tied to the global easing of markets. Even if the United Kingdom votes to remain in the European Union, no noticeable upside is likely to take place in the United Kingdom economy as current pressures will remain. However, as the Federal Reserve dithers on its next move, the Bank of England looks to be moving further and further away from any increase in interest rates.
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Officials also cited the U.K.’s record current account deficit as a potential vulnerability.”Increased perceptions that the outcome of the referendum could lead to a weaker outlook for United Kingdom national income may call in to question the ability to maintain the current large-scale of capital inflows”, the MPC said.
