Bank of England cuts UK growth outlook as rates held

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The Bank of England has said it expects economic growth to be flat in the second quarter of the year.

The Bank’s Monetary Policy Committee (MPC) had previously predicted growth of 0.2% over the period.

The committee said the downgrade in part reflected an easing of stock building ahead of Brexit deadlines.

The forecast came as the nine member committee announced it had voted unanimously to keep UK interest rates on hold, at 0.75%.

The MPC said since its previous meeting the “near-term data have been broadly in line with the May Report but the downside risks to growth have increased”.

Global trade tensions had intensified and domestically, the “perceived likelihood of a no-deal Brexit” had risen, it added.

“As expected, recent UK data have been volatile, in large part due to Brexit-related effects on financial markets and businesses.

As a result, the committee said in its minutes that after growing by 0.5% in the first three months of 2019, it now expected the economy to show zero growth in the second quarter.

“That in part reflects an unwind of the positive contribution to GDP in the first quarter from companies in the United Kingdom and the European Union building stocks significantly ahead of recent Brexit deadlines,” the MPC said.

The underlying pattern of relatively strong household consumption growth but weak business investment has persisted.

In setting interest rates, the Bank is aiming to keep inflation within 1% either side of its target of 2% “in a way that helps to sustain growth and employment”.

On Wednesday, it was announced that inflation had fallen to its target of 2% in May, easing pressure on the Bank to raise rates to keep prices under control.

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