Thursday, 11 May 2017

Bank of England cuts growth forecast and warns real wages will fall

Britons face a year of falling real wages, the Bank of England has warned for the first time, cutting its economic growth forecast less than a month before the general election.
And in a further coded warning to Britain's politicians, the Bank said that the relatively robust economic growth it was expecting in the coming years was predicated on a "smooth" set of Brexit talks.

In its quarterly Inflation Report, the Bank cut its forecast for 2017 economic growth very slightly from 2% to 1.9% but raised its projection for economic output next year and in 2019.

However, for the first time in at least three years, the Bank also predicted that at 2.8% this year, inflation was set to outpace earnings growth, which will be only 2%.

The Bank said that above target inflation was almost entirely due to the higher cost of imports, which have themselves risen because of the fall of the pound after the EU referendum.

Governor, Mark Carney, told reporters: "With wage growth moderating and inflation picking up, both household spending and GDP growth have slowed markedly.

"In contrast, sterling has appreciated, possibly reflecting market expectations of a more orderly Brexit process.

"On balance, the committee judges that consumption growth will be slower in the near term than previously anticipated."

SKY     News.