The England Bank reduced its growth projection for the British economy this year, since it reduced its main interest rate on Thursday for the third time in six months.
In a statement, the monetary policy committee of nine members of the Bank reduced its main interest rate in a percentage quarter to 4.50%, taking it to its lowest level since mid -2013.
That decision was expected widely in financial markets.
What was not expected was the scale of the growth reduction in the bank's accompanying economic forecasts. The bank now predicts that the British economy will only grow by 0.75% this year, below its previous forecast of 1.5% only three months ago.
If that turns out to be remotely precise, it will be a greatly disappointing news for the new Labor Government of the United Kingdom, which has made the growth its number one mission, since it will increase the living standards and generate funds for public services hungry for cash hungry . With the growth that was elusive, the popularity of the party has fallen abruptly since its electoral victory in July.
The Treasury Chief, Rachel Reeves, who faced criticism for increasing business taxes in her first budget last October, welcomed the reduction of the interest rate, but said “I was not yet satisfied with the rate of Growth “and that the government will go” faster to start economic growth.
Get last minute national news
For the news that affects Canada and worldwide, register to receive news alerts that are given directly when they occur.
Undoubtedly, the Government will expect the Central Bank to reduce it to reduce interest rates even more in the coming months, since it will contribute to lower mortgage rates and cheaper loans, although reducing the yields offered to savers.
Financial markets remain uncertain in terms of how many additional reductions will have this year, since the bank also forecasts higher inflation than anticipated in the coming months, expects inflation to reach 3.7% at some point in the first time in the first half of the year, before going to drift. Towards its 2%target rate.
Given that growth and inflation fund curtain, the governor of the Andrew Bailey Bank said the prospects for the British economy were still uncertain, and could be more uncertain if the president of the United States, Donald Trump, continues with his threats tariffs.
“We will monitor very closely the economy of the United Kingdom and global developments and adopt a gradual and careful approach to further reduce rates,” Baily said. “Low and stable inflation is the basis of a healthy economy and it is the work of the Bank of England to guarantee that.”
A big surprise in the rate decision on Thursday was that two of the nine panel members voted for an even greater than half a point to 4.25%.
Luke Bartholomew, an attached deputy chief economist, previously aberden Asset Management, said the fact that two voted for a bigger cut “gives an idea of how worried are some policy formulators on the winds against growth.”
The rate fixing panel is not directly directed to growth, since its mandate is to ensure that inflation, measured by the consumer price index, reach a 2% target in the next two years or so. However, the lower growth can maintain inflation under control, since it is an indication of a lower demand in the economy.
Although inflation is 2.5% and it is expected to increase in the coming months, partly as a result of the commercial tax increases of the new Labor Government, most economists think that the lowest tendency will then tend towards the objective, of There the ability of the panel to reduce Thursday.
Inflation is well below the levels seen a couple of years ago, in part because the central banks have dramatically increased the indebtedness costs from almost zero during the pandemic of the coronavirus. Then, prices began to shoot, first as a result of the problems of the supply chain and then due to the large -scale invasion of Russia, which raised energy costs.
As inflation rates have decreased from the maximum of multiple scales, central banks, including the United States Federal Reserve, have begun to reduce interest rates, although few, if there are any, economists think that the rates will return to the super low levels that persisted in the years after the global financial crises of 2008-2009 and during the pandemic.
& Copy 2025 the Canadian press