Bank of England Governor Mark Carney said investors were underestimating how muc...
LONDON - Bank of England Governor Mark Carney said investors were underestimating how much the central bank could raise interest rates even as it kept borrowing costs on hold on Thursday due to Brexit uncertainty.
But Carney made clear his view that investors were too relaxed about the pace at which the BoE could resume its gradual rate increases to ease Britain off the stimulus of low borrowing costs that has been in place for more than a decade. The BoE upgraded its forecast for growth in the world’s fifth-largest economy to 1.5 percent, up from the decade-low 1.2 percent it predicted in February, largely reflecting better global economic prospects.
During the first quarter of 2019 the economy probably grew by 0.5 percent due to businesses building up stocks ahead of Brexit, the BoE said - a faster rate than the 0.2 percent growth it forecast in February. However, the central bank expects growth to slow to 0.2 percent during the current quarter.
“More generally, there remained mixed signals from indicators of domestically generated inflation and the cost of waiting for further information was relatively low,” the BoE said, adding it continued to assume Brexit would go smoothly. The BoE’s tightening stance contrasts with the position of the U.S. Federal Reserve, which on Wednesday said it saw no case for moving rates in either direction, and faces pressure to lower interest rates from President Donald Trump.
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