Bank warns of no-deal recession

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Bank warns of no-deal recession

"Uncertainty about the outcome of negotiations has intensified since November and is now weighing more heavily on activity, predominantly through lower business investment and tighter financial conditions", he said.

Thursday the Bank slashed growth forecast to its weakest in 10-years, growth forecast was cut to 1.2%, its lowest since 2009 when the United Kingdom hit a financial crisis followed by a recession.

Brexit is causing the United Kingdom economy to weaken, it said, cutting its 2019 growth forecast to just 1.2%, the lowest since the financial crisis.

Bank of England governor Mark Carney has warned about the mounting risk of recession in the event of a no-deal Brexit, as Britain's growth forecast was slashed to its weakest for 10 years.

The projections, which assume a soft Brexit with a transition...

Ricky Knox, CEO of Tandem Bank, says, "Irrespective of whether we have a no-deal Brexit, the United Kingdom economy is slowing, just look at the problems with British auto manufacturing".

The Bank of England held the monetary policy unchanged in line with the expectations while raising the warning about Brexit uncertainty negative effects, but Governor Carney opted for a calm tone that finally supported Sterling.

Carney said that the possibility of a "no-deal" Brexit has gone up since the aftermath of the Brexit vote in 2016, when it was considered unlikely. Modi's government has been pushing the RBI to transfer more of its excess capital to the state as well as ease lending restrictions on banks to spur growth.

As a result of the announcement, Sterling dropped by 0.6% versus the USA dollar at 1.285.

He said the future was "highly uncertain" and pointed to betting markets only offering a 30% chance the United Kingdom will leave the European Union bloc on 29 March.

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.

Howard Archer, an economist with consultants EY Item Club, said this implied two quarter-point rate rises over the next two years, compared with three expected in November.

The Bank said growth was likely to have halved to 0.3% in the fourth quarter of 2018, down from 0.6% in the previous three months and estimated it will fall again to 0.2% in the first quarter of 2019.

For 2020, the BoE also lowered its overall outlook to 1.5 percent from 1.7 percent before a stronger-than-previously expected 1.9 percent in 2021.

Most economists polled by Reuters expect interest rates to rise later this year if Brexit goes smoothly.

Inflation was likely to fall below its target because of the global fall in oil prices in the coming months before bouncing back above 2 percent in a year's time.

"Given core-inflation is already quite high, we see headline inflation rising sharply towards the end of the year".

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