The Bank of England downgraded its forecasts for UK economic growth Thursday and kept interest rates unchanged, even as it warned that the Israel-Hamas war could push up energy prices and inflation won’t return to target for another two years.
The central bank now expects gross domestic product to have flatlined in the July-to-September quarter and to grow just 0.1% in the current quarter, marking gloomier forecasts than its projections in August.
Despite the economic slowdown, the Bank of England sees inflation returning to its 2% target only at the end of 2025, roughly six months later than previously forecast.
Although the central bank kept interest rates unchanged for the second time in a row, it did not rule out further rate hikes and said rate cuts were not yet on the table. Six members of the monetary policy committee voted to hold rates, while three voted for a 0.25-percentage point increase.
The Bank of England thinks inflation will slacken below 5% in October and remain around that level for the rest of the year.
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