While the Bank’s growth outlook remains similar to its previous forecast in May, the central bank’s forecasters have again reduced their outlook for 2017 growth. The BOE estimates a 1.7 percent increase by year-end rather than May’s 1.9 percent estimate.
Looking ahead, the Bank has made a slight tweak to its GDP (gross domestic product) estimates over a three-year period. The MPC now sees growth at 1.6 percent in 2018, down from 1.7 percent, while GDP in 2019 remains at 1.8 percent.
The BOE’s outlook for inflation is broadly similar to that in May too. However, the MPC predicted “significant upward pressure” from import prices in the coming months and for inflation to peak at around 3 percent in October. The Bank’s current inflation target is 2 percent.
When they last met in June, rate-setters on Threadneedle Street voted by a narrow 5-3 margin to keep interest rates at 0.25 percent. The surprisingly close decision fueled speculation that the BOE would soon be ready to lift borrowing costs and follow in the footsteps of the U.S. Federal Reserve.
However, economic data since the central bank’s June meeting appeared to hamper the case for hawks – those who would prefer an end to easy monetary policy. Sluggish growth rates in the first half of the year, an unexpected slip in inflation and weak wage growth all attributed to a 6-2 vote in favor of maintaining rates at record low levels.
Meanwhile, formal Brexit talks between the U.K. and the European Union have endured a somewhat bumpy start, leaving many firms anxious about the risk of a damaging divorce in 2019.