Bank of England downgrades growth expectations

On their marks Unite members and workers in Carney masks picket the Bank’s head office in the City of London

The Bank of England joined other major central banks Thursday in signaling that a long era of easy money is gradually drawing to a close, saying that it anticipates raising interest rates in the U.K.at a faster pace than investors now expect.

The Bank's inflation report said it expected economic growth of 1.7 per cent in 2017 and 1.6 per cent in 2018, down from the 1.9 per cent and 1.7 per cent in previous forecasts.

"The process of leaving the European Union is beginning to affect potential supply in the United Kingdom", said Gov. Mark Carney.

Forty per cent of the Bank's decision maker panel, which collects information on business conditions, is impacted by Brexit supply chain issues and other uncertainties, the Governor adds.

It also fell around a cent against the dollar, plumbing a three-day low of $1.3140, having earlier reached an 11-month high of $1.3267 against the U.S. currency.

With average wage growth falling below the rate of inflation since May, the Bank has revised wage growth forecast for 2018 to 3%, down from 3.5% previously.

"We think that would be insufficient relative to what would be required to fulfill our mandate", Mr.

The Bank of England said of the decision: "All members agreed that any increases in Bank Rate would be expected to be at a gradual pace and to a limited extent".

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The Pound tumbled by around a cent against the Euro today as the Bank of England left its monetary policy unchanged.

"The loss in real income as a result of the depreciation in sterling may also lead to some people wanting to work longer hours to make up that loss", the bank's inflation report said. "But it's just a rate rise, and we got perfectly used to rate rises of this size in the past", he said.

Ishaan Malhi, CEO and founder of online mortgage broker Trussle, said there are positive and negative implications for households.

The governor noted that decrease in investment could impact the monetary policy.

Growth is likely to remain at 0.3% in the third quarter, according to the Bank.

"The market hadn't priced in much possibility of a hike this month but the 6-2 vote was a bit of a dovish surprise for us", said Yujiro Goto, an analyst at Nomura, one of the only banks that had been calling for a rate hike this month.

Last time around three members of the committee voted for a rate rise, this is now down to two, following the departure of Kristin Forbes. The BOE estimates a 1.7 percent increase by year-end rather than May's 1.9 percent estimate. The weaker pound is good news for the FTSE 100, which is at its highest level since the end of June. Officials expect higher exports to offset some of that softness.

Meanwhile, formal Brexit talks between the United Kingdom and the European Union have endured a somewhat bumpy start, leaving many firms anxious about the risk of a damaging divorce in 2019.

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