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JAKARTA: The sun sets behind a crane at a building construction site in Jakarta yesterday.—AFP Brexit-wary BoE cuts growth forecast Bank leaves rates on hold; Sterling falls, shares rise LONDON: The kept interest rates at a down from its May forecast of 1.9 percent. It also a 25 basis point rate rise. But BoE Chief Economist slowest growth since 2012 in the first half of this year, record low again yesterday and seeing Brexit weighing shaved its growth forecast for next year to 1.6 percent , who said in June that he was likely to inflation unexpectedly eased back in June and wage on the economy, cut its forecasts for growth and from 1.7 percent, but kept 2019 at 1.8 percent. back a rate hike in the second half of this year, stayed growth is weak. wages. The gloomier outlook for the next two years with the majority. The Bank said it might raise bor- A series of surveys of Britain’s manufacturing, con- further reduced speculation in financial markets that Grim outlook rowing costs a bit more than investors expect over struction and services sectors published this week the BoE might be nearing its first rate hike in a decade. The BoE’s rate-setters voted 6-2 to keep Bank Rate the next three years and suggested that a first hike suggested the economy remained in a low gear in Governor nonetheless sought to keep at 0.25 percent, in line with forecasts in a Reuters poll might come within a year. July. Furthermore, Brexit talks between London and alive the possibility of one next year. He said uncertain- But US bank Citi said the BoE was probably more Brussels have made little progress, raising concerns ty about Brexit-in particular lower investment by com- worried about the risks of a disorderly Brexit than it that a messy departure from the bloc in 2019 could panies-meant the economy could not grow as fast as appeared yesterday. “Brexit downside risks are larger hammer the economy. In response to the painfully before without pushing up inflation. So, just a small than the MPC can formally acknowledge, which slow rises this year, the Bank cut its forecasts for wage improvement in growth could bring forward a rate keeps the bar for a pre-2019 rate hike high, in our growth in 2018 and 2019 to 3 and 3.25 percent, down hike. “The speed limit, if you will, of the economy has view,” analysts at the bank said in a note to clients. Citi by half a percent for each year. It blamed the down- slowed,” he told reporters. “That ... could have conse- said a smooth exit from the EU was still the most likely grade on Britain’s stubbornly weak productivity and quences for monetary policy, depending on the evolu- outcome, so the BoE would probably raise rates from in part on the Brexit uncertainty. tion of demand.” But investors saw no sign that the late 2019, taking them to 2 percent by the end of The BoE lowered by only a fraction its forecasts BoE was in a hurry to raise rates, a stark contrast to the 2021. The Bank kept its asset purchase programs for inflation which it now saw at just under 2.6 per- outcome of its last meeting in June when markets unchanged yesterday. cent in a year’s time after peaking at around 3 per- thought a hike might be imminent. cent in October. British inflation in June stood at 2.6 The pound hit a nine-month low against the euro Surveys percent and the BoE’s latest forecasts see it remain- and fell by more than a cent against the US dollar. LONDON: Bank of England Governor It also said a bank lending scheme would end as ing above its 2 percent target throughout its three- Shares rose and British government bond prices Mark Carney addresses the media dur- on schedule in February 2018. BOE DILEMMA The year forecast period. Helping to offset the squeeze jumped. Central banks around the world have strug- ing a press conference. —AP split on the MPC over what to do with interest rates on household spending power, exports were seen gled to wean their economies off the stimulus of rock- highlights the challenge facing the central bank. On growing a bit more strongly than in the BoE’s May bottom interest rates, largely because of weak wage of economists. That was more clear cut than an unex- the one hand, Britain avoided a recession after the forecasts. But investment was likely to be weaker growth for workers. The BoE faces the extra challenge pectedly close 5-3 vote at the Monetary Policy shock referendum decision in June 2016 to leave the than previously expected in 2018 and 2019. Carney of Britain’s leaving the European Union, and its uncer- Committee’s meeting in June. Since then one of the EU, inflation is running above the BoE’s 2 percent tar- said investment levels in 2020 were set to be 20 per- tain impact on Britain’s economy. The Bank said it now dissenters, Kristin Forbes, has left the central bank. get, and unemployment is at a four-decade low. At centage points below a BoE forecast before the expects the economy to grow by 1.7 percent this year, Michael Saunders and Ian McCafferty voted again for the same time, data has shown the economy had its Brexit vote. —Reuters