The Bank of England expects UK economic growth to be flat in the second quarter of the year, highlighting global trade tensions and fears of a no-deal Brexit.
The forecast came as the Bank’s Monetary Policy Committee (MPC) unanimously voted to hold interest rates at 0.75%. The bank wants to keep inflation close to its target of 2% “in a way that helps to sustain growth and employment”.
The MPC had previously projected economic growth of 0.2% in the second quarter. However, since its last meeting, the MPC said “near-term data have been broadly in line with the May Report, but the downside risks to growth have increased”.
Globally, trade tensions have intensified, while domestically, the ”perceived likelihood of a no-deal Brexit” had risen, the Bank of England said in its policy statement.
The bank noted that there has been as easing of stock-building ahead of the originally expected Brexit date, hitting growth in the quarter.
The forecast “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.
Despite a gloomy outlook for the second quarter, the Bank of England still expects the UK economy to grow in 2019.
Sterling dropped to below $1.27 after the Bank’s report was published.
