The Bank of England today slashed its forecasts for economic growth in the first three years after Brexit — but decided to leave interest rates on hold.
The UK’s output is now expected to rise only by a meagre 0.8 per cent this year compared with the prediction of 1.2 per cent the Bank made in November.
GDP growth next year has also been revised downwards to 1.4 per cent from 1.8 per cent, while in 2022 growth of only 1.7 per cent is expected, compared with two per cent previously.
The Bank’s rate setting Monetary Policy Committee — chaired for the last time by outgoing governor, Mark Carney — said that while Brexit uncertainty has lifted since the election “the rise in trade barriers as the UK leaves the EU is projected to weigh on productivity growth”.
Over the three-year period growth is expected to be 0.75 per cent weaker than forecast in November, equivalent to around £15 billion of lost economic output.
However, the MPC voted by seven to two to leave its benchmark interest rate at 0.75 per cent.
City forecasters had been pencilling in an “eve of Brexit” rate cut until more buoyant economic data in recent weeks left the decision hanging in the balance.
Howard Archer, chief economic adviser to forecasters EY ITEM Club, said: “The majority of MPC members took the view that there had been enough signs of improvement in the economy since December’s general election to avoid the need for further stimulus for now at least. They also noted that global growth had appeared to stabilize and that there had been a reduction in trade tensions.”
