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08 February 2019

Brexit “fog” casts gloom over UK economic outlook

UK interest rates have been kept on hold, with the Bank of England cutting 2019 UK economic growth forecasts to 1.2%.

Bank governor Mark Carney said the “fog of Brexit” was causing uncertainty, impacting business decisions and hitting consumer confidence.

James Rowbury, Investment Research Coordinator, said: “Unsurprisingly, the Monetary Policy Committee has unanimously opted to hold UK interest rates at the prevailing 0.75%.

“Despite low unemployment, and wage growth at its highest for almost a decade, the Bank of England has its hands tied somewhat due to the ever-present Brexit uncertainty and a medium-term downward trend in inflation, illustrating a slower economic growth profile for the UK.

“To some extent, the Bank will have been influenced by a recent U-turn from the Federal Reserve chairman, Jerome Powell, who heeded warnings from global stock markets in December after implementing a small interest rate rise in the United States. The Dow Jones Industrial Average, a leading indicator of US economic health, crashed to 2018 lows, following a meagre hike of only 25 basis points.

“Most important for investors was the first inflation report for the year, where the Bank outlined expectations for more subdued growth throughout 2019, driven in the main by a more modest global outlook. However, this has now been elevated by increasing Brexit uncertainty, which the Bank now infers will have a greater impact than they expected in November’s report.”

Ends

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Brexit “fog” casts gloom over UK economic outlook

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