Bank of England trims UK economic growth forecast
BRITAIN’S economy should keep growing solidly, the Bank of England said yesterday, but at a more moderate pace than it had previously hoped.
Officials trimmed their growth forecast for the next year to just below three per cent.
Consumers can expect a boost from flat prices over the coming months, with inflation likely to turn negative for a short period, governor Mark Carney said.
But prices will pick up again when the impact of low oil prices falls out of the calculation, and if interest rates do not rise over the coming years, inflation is set to rise above its two per cent target by the end of 2016.
The governor did warn that there are still some problems in the global economy, and that public spending cuts combined with households paying down their debts could weigh on the economy. As a result, economists now expect the first interest rate rise to come in early 2016.
“The overall impression we get is that the monetary policy committee is happy with the stance of policy and broadly in no rush to raise interest rates, and certainly not until some of the various uncertainties have been resolved,” said Philip Shaw from Investec. “As a result we have pushed back the timing of our expectation of the first increase in interest rates to the first quarter of 2016.”
Carney said uncertainty in the economy meant it is important to reassess the picture at monthly meetings, “so we can respond to events and act to deliver the price stability upon which British households and firms depend.”
“This provides the best environment for the ingenuity and creativity of the British people to flourish and drive the sustained rise in living standards to which we all aspire,” he added.