Bank of England downgrades UK growth forecast
The Bank of England has lowered its economic growth forecast for the UK to 1.9%, lower than February’s prediction of 2.05. The BoE says that the downgrade follows a slowing in consumer spending. Rising inflation and poor income growth were cited as the main reasons for consumers feeling the squeeze; reflected in disappointing retail sales data and a surprisingly steep drop in new car sales.
As was widely anticipated, interest rates remain at 0.25%.
David Johnson, director at Halo Financial, said:
“While the latest Consumer Spending and Gross Domestic Product data disappointed, recent Purchasing Managers’ Index results have, in contrast, looked very positive, providing some extra momentum for the Pound and balancing sentiment to some degree.
“In advance of today’s “Super Thursday” announcements, Sterling was on the rise again, reaching rates against its major currency partners not seen for months and even years. The Pound was testing the EUR 1.20 level and the USD 1.30 level. However, immediately following today’s release of BoE Monetary Policy Committee meeting minutes, Sterling fell against both the Euro and US Dollar from the highs seen early this morning; falling by 0.40% and 0.43% respectively.
“Despite all these key economic figures being released and the jumpiness of the Pound in response, we believe markets will continue to focus on the UK general election and the ongoing Brexit negotiations, which are likely to have a greater impact on Sterling than snapshot economic data and forecasts. Volatility and uncertainty will continue for the Pound in its major currency pairings. We are seeing that in movement across the Euro, US Dollar, and Australian Dollars, in particular.”
