Belfast Telegraph

Bank of England warns of slowdown as interest rates kept on hold

By Holly Williams

The Bank of England warned signs of a new year slowdown in growth were emerging, as it capped a dramatic year for the UK economy by keeping interest rates on hold.

Policymakers said while growth had been "remarkably steady" since the Brexit vote shock, cracks were starting to show in the business sector as firms put investment decisions on hold. All nine members of the Bank's Monetary Policy Committee (MPC), including Bank of England Governor Mark Carney voted to keep rates at 0.25% in the last decision of the year.

It comes after the US Federal Reserve hiked rates last night for the first time since December 2015, and signalled three more rises in 2017, as America's economy continues to strengthen.

Britain's economy is expected to grow by 0.4% in the fourth quarter, down from 0.5% in the previous three months, according to the Bank.

But minutes of the meeting confirmed growth in 2017 was set to falter, with recent surveys highlighting uncertainty among businesses ahead of the Brexit negotiations.

"Forward-looking components of business surveys were weaker than those regarding current output," according to the MPC minutes.

"Some slowing in activity was therefore in prospect during 2017," the MPC added.

Sterling slid sharply against the dollar to 1.24 on the news, down 0.7% on the day, and extending falls from Wednesday, when the US Federal Reserve hiked rates, causing the greenback to spike.

The Bank said the recent strengthening in the pound, which had risen by around 6% since November, meant inflation may not rise as sharply as it forecast in its last quarterly report.

But it warned inflation was still set to race higher in 2017 and 2018, as the weak pound pushes up prices, adding sterling was set for "month-on-month" volatility as the UK's Brexit plans evolve.

Belfast Telegraph