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Bank of England cuts UK growth forecasts

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The Bank of England has cut its forecasts for the UK economy, saying that uncertainty over Brexit had "intensified considerably".

It said growth would drop to 0.2% in the final quarter of 2018, from 0.6% in the third quarter.

The UK’s central bank voted unanimously to keep interest rates on hold at 0.75%. It said that commercial bank funding costs – the level that banks charge each other to lend – had “risen sharply”. There was a danger these rises could be passed onto consumers, which would dent spending.

On the upside, the Bank said wage growth was positive and extra spending on the NHS would lift growth over the next few years. At the same time, low oil prices would keep inflation in check.

In spite of stronger retail sales figures out today, the Bank of England’s survey indicated that Black Friday sales had fallen below expectations and consumers were still cautious.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “No surprises from the Bank of England today. With Brexit as far from resolution as ever, Mark Carney has rightly put monetary tightening on hold in the UK. There will be plenty of time to normalise interest rates after next March.

“The Monetary Policy Committee voted unanimously for no change in base rate today. This is unsurprising in light of the gloomy tone of the comments that accompanied the decision. In particular, the Bank highlighted the intensification of Brexit uncertainties since the committee’s last meeting and the impact of these on financial markets. The outlook for global growth has also softened and the downside risks increased, the Bank said.

“It would be surprising if interest rates rose by more than one quarter point increase in 2019 and the rate of tightening will most likely remain slow and steady throughout 2020 too.”



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