Bank of England reduces forecast for 2018 economic growth

Bank of England [File photo/sohu.com]

British central bank the Bank of England (BoE) Thursday forecast a fall for inflation over the coming months towards its target figure of 2 percent, reduced its forecast for GDP growth for 2018 and all but ruled out any rise in the bank rate before the formal Brexit date at the end of March next year.

BoE governor Mark Carney told journalists at a press conference at the bank's central London headquarters to launch its quarterly inflation report: "UK fiscal policy is shifting from a restrictive to a more accommodative stance."

With Britain's withdrawal from the EU scheduled for the end of March next year, with a possible transition period beyond that and with divorce talks between Britain and the EU stalled, Carney stressed the uncertainty of the current situation.

Carney said: "Since the nature of EU withdrawal is not known at present, and its impact on the balance of demand, supply and the exchange rate cannot be determined in advance, the monetary policy response will not be automatic and could be in either direction."

The November Inflation Report indicated that the BoE expects inflationary pressures to remain within the economy keeping CPI inflation (currently at 2.4 percent) somewhat above its 2 percent target, and drawing a likely monetary policy response over the next three years.

The BoE downgraded its GDP growth expectations for this year from 1.4 percent to 1.3 percent.

The bank rate is currently at 0.75 percent and Carney said that it would rise "in a limited and gradual fashion" up to 2021 to about 1.5 percent.

This rise was conditional on the nature of Brexit, with a more disruptive Brexit having a negative impact on the economy and casting an upward rise in the bank rate into doubt.

Carney said that a No Deal Brexit was the least likely outcome of the various Brexit endgame scenarios.