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BoE scraps rate cut signal after Brexit hits pound

Thursday, November 03, 2016 - 01:23

The Bank of England scraps plan to cut interest rates as the slide in sterling prompts it to ramp up its forecasts for growth and inflation in 2017. Julian Satterthwaite reports.

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SOUNDBITE (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "So what did we miss, and what have we learned about the adjustment to Brexit?" A note of humility from Mark Carney. The Bank of England governor keeping rates on hold, and admitting that his team overestimated the impact of Brexit. That after a spate of better than expected data on the economy. SOUNDBITE (English) MARK CARNEY, GOVERNOR, BANK OF ENGLAND, SAYING: "The judgment of the MPC has been that the degree of accommodation that is currently being provided is appropriate. It's appropriate because of the pressures that are weighing down on activity and it's appropriate because of the forces that are causing inflation to rise and rise above that 2 percent target." The bank now almost doubling its growth forecast for 2017. Shoppers and home buyers proving resilient. But it's not all good news. Growth forecasts for the following years cut. Inflation also expected to rise sharply as a weaker sterling drives up the cost of imports. That leaves the bank with a tough call on rates. SOUNDBITE (English) JASPER LAWLER, MARKET ANALYST, CMC MARKETS, SAYING: "The prospect of higher prices is the biggest risk that we face, and so it is a concern for the Bank. Will they react against it? History suggests that they won't. The Bank of England in the not so distance past tolerated 5 per cent plus inflation. " Carney says he now has a neutral stance on rates. Eurosceptics say that should be his position on Brexit too.

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BoE scraps rate cut signal after Brexit hits pound

Thursday, November 03, 2016 - 01:23