Sterling dipped on Thursday afternoon before later recovering after the Bank of England warned about the “fog of Brexit” and its unfavourable impacts on the economy.
In a widely expected move, the Bank of England left interest rates unchanged at 0.75% in February. However, the endless uncertainty over Brexit and slowing global growth forced the central bank to cut its 2019 economic growth forecast. UK growth is now expected to expand 1.2% this year from 1.7% projected in November. With the BoE’s dovish slant also dampening expectations over further interest rate hikes anytime soon, the battered Pound could be in for further punishment.
The key takeaway from today’s BoE meeting is that the damage to the economy from Brexit has increased. With businesses holding back on spending and consumer feeling the heat, the BoE is likely to maintain a cautious stance until more clarity and direction on Brexit is provided.