Economy

RBI Governor to meet bank CEOs to discuss rate cut transmission

RBI Governor to meet bank CEOs to discuss rate cut transmission

The bank's Quarterly Inflation report, released on Thursday, warned that Brexit was having a clear negative impact on the United Kingdom economy, saying that since the last Inflation Report, in November: "The further intensification of Brexit uncertainties, coupled with the slowing global economy, had weighed on the near-term outlook for United Kingdom growth".

The central bank reduced its 2019 economic growth forecast to 1.2%, down from its earlier estimate of 1.7% that it made in November previous year.

The Bank slashed this year's growth forecast to 1.2 per cent - the lowest since 2009, when the economy contracted by 4.2 per cent at the height of the recession following the financial crisis.

The Bank of England said Britain faced its weakest economic growth in 10 years in 2019, blaming mounting Brexit uncertainty and the global slowdown, but it stuck to its message that interest rates will rise if a Brexit deal is done. Experts said rate-setters are likely to hold off from raising rates for some time until Brexit clarity emerges.

BoE Governor Mark Carney said "the fog of Brexit" was causing tensions in the world's fifth-biggest economy, and that the risk of an abrupt, economically damaging departure from the European Union was growing.

This slowdown mainly reflects softer activity overseas and the greater effects from Brexit uncertainties at home, ' the Bank's policymakers said after voting unanimously to keep interest rates unchanged at 0.75%.

It might end up as a no-deal Brexit which would be awful for the United Kingdom economy, or it might be postponed and that would push uncertainty further down the road.

"The Bank's forecasts, when put together with recent business surveys, illustrate the harmful impact on the economy the longer that this goes on".

More news: Pope Publicly Acknowledges for First Time Clergy Sexual Abuse of Nuns

Indian inflation reversed course and nudged up slightly in January but remained below the central bank's target for a sixth straight month, a Reuters poll predicted, supporting this week's unexpected move by policymakers to cut rates.

A 5 per cent depreciation in sterling would lift inflation to 2.4 per cent by the end of 2021 - versus 2.1 per cent in the current projections - while a gain of that magnitude would drop the rate to 1.8 per cent.

Officials said that potential supply growth is now a "little below" the 1.5 per cent previously estimated.

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.

Some economists also felt that there was a danger that a largely independent central bank could come under government pressure - providing too much stimulus for the economy after last week's budget handouts.

It said the United Kingdom economy is set to grow by just 1.2 percent this year instead of 1.7 percent as predicted just three months ago.

Carney denied the February inflation report was a move away from its plan for "gradual and limited" interest rate hikes in the future.

Investors now see nearly no chance of a quarter-point rate move by the end of the year.


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