Sterling Drops-A Bad Year Start for Bank of England

RBI cuts repo rate in first policy review under new governor

RBI cuts repo rate in first policy review under new governor

In its quarterly health check, the Bank has cut its growth forecast for the economy in 2019 from 1.7% to 1.2%, placing the blame on a slowing global economy, as well as Brexit uncertainty.

"The central bank's commentary on inflation and growth support a dovish outlook for the policy", said Shashank Mendiratta, an economist with IBM in New Delhi, noting that on growth the RBI once again highlighted downside risks to its forecast.

Ricky Knox, CEO of Tandem Bank, says, "Irrespective of whether we have a no-deal Brexit, the United Kingdom economy is slowing, just look at the problems with British vehicle manufacturing".

Carney said, "When the economy is growing more slowly, the probability of it having a negative quarter or two goes up".

The BoE has previously said a worst-case Brexit scenario, with no deal for a transition period and a sudden loss of confidence in Britain among foreign investors, could hammer the economy more than the global financial crisis did.

Brexit is causing the United Kingdom economy to weaken, it said, cutting its 2019 growth forecast to just 1.2%, the lowest since the financial crisis.

In recent weeks, it has also eased curbs on some state-owned bank lenders and is set to provide the government with a bigger dividend out of surplus central bank funds.

Last week the U.S. Federal Reserve signaled its three-year run of raising rates might be ending and earlier on Thursday, India's central bank cut borrowing costs.

The pound initially tumbled after the report, but later recovered to stand 0.4% higher at 1.298 United States dollars and 0.4% up at 1.14 euros. Baron Forsyth told BBC Question Time: "You may recall that immediately after the referendum on our membership of the European Union, the Treasury said unemployment would go up by half a million".

The UK economy is expected to report on the manufacturing, the fourth quarter GDP and the January inflation during the upcoming week with all figures painting the same picture of the general economic slowdown.

The BoE said its survey of firms and wider evidence had indicated that Brexit uncertainty had intensified among the business community, with investment activity tailing off towards the end of 2018. The economy could grow by around 0.5 percentage point more over the coming three years.

This is being driven by sharp falls in business investment, as well as a drop in consumer spending and signs of a weaker United Kingdom housing market.

But it said the hit was expected to be "prove only temporary", with a recovery in expansion later in 2019 - though this is based on a Brexit deal being reached by March 29.

The FXStreet Forecast Poll 1-month forecast turned neutral expecting probability of delayed Brexit may change the outlook going forward.

On the flip side, growth could slump to a potential 0.8% in 2019 should uncertainty persist and financial conditions tighten. "We might see inflation normalizing back to their 3-4 percent range by the middle of this year".

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