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UK growth forecase cut by the Bank of England

According to the Bank of England’s (BoE) latest forecast, as reported in their ‘Inflation Report’ (IR) released in early February, economic growth in the UK for 2016 will be reduced to 2.2%, a fall from their November forecast of 2.5% growth.

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 At the same time, the IR downgraded its growth forecast for 2017 to 2.3% from its previous forecast, made in November 2015, of 2.6%.

UK average weekly wage growth forecasts were also downgraded, as the BoE now expects such growth to be 3% in 2016, down from its previous forecast of 3.75%. The report stated that it had: “eased significantly more” than anticipated. The Bank now believes that it will not be until 2018 that average weekly earnings will increase to the levels seen prior to the financial crisis.

At a recent conference the Governor of the BoE, Mark Carney, stated that there were some positive signs for the UK economy, including, “Sterling has fallen 3.5% since November. It’s the largest decline between inflation reports since the crisis.” Any fall in the exchange rate of sterling against our trading partners’ currencies makes UK exports cheaper and should, therefore, boost our competitiveness in the global market place.

The BoE also released the minutes of its latest Monetary Policy Committee (MPC), which sets interest rates. This disclosed that they voted unanimously 9-0 to hold interest rates at their historically low rate of 0.5%. It was interesting to note here that one member of the MPC, Ian McCafferty, who had previously been considered a Hawk by voting to raise interest rates in their August meeting, this time voted for no change.

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