Macroeconomics
The british central bank keeps interest rate at rest and oppjusterer forecasts for growth this year and next year.
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The british central bank the Bank of England has decided to keep the key rate steady at 0.25 percent, announced the central bank in a press release in connection with the rentemøtet Thursday.
the Frame for the purchase of government bonds in the markets, which are often referred to as quantitative easing, is also kept unchanged at 435 billion pounds.
the Decisions were as expected, and all the nine members of the central bank’s monetary policy committee voted in favour of both decisions.
Powerful upward revision of growth prospects
the Committee promises at the same time the forecast for the development of the british economy in the years powerful. The central bank is waiting now a growth in the gross domestic product (gdp) of 2.0 percent, according to the inflation report that was presented Thursday. Previous estimates, from november of last year, showed an estimate of 1.4 per cent growth in gdp.
as late as in august of last year expected the central bank to a growth of far more moderate 0.8 per cent in the year.
the Estimate for 2018 is lifted at the same time to 1.6 per cent, from the previous estimate of 1.5 percent. In 2019 await the central bank a growth of 1.7 per cent.
The oppjusterte outlook reflects the fiscal stimulation as the government signalled in the autumn, better momentum in the global economy, higher equity prices globally and better access to credit, especially for households, informs the central bank.
Waiting on brexit-effects
the Interest rate and the frame verdipapirkjøpene was last time amended in august of last year. The interest rate was lowered by 0.25 percentage points and the frame verdipapirkjøp expanded by 60 billion pounds.
Politikkendringen came after that the british people in the referendum in late June voted to report the country out of the EU. The result led to an immediate and powerful reaction in the financial markets. The fear of serious consequences for the british economy contributed to, among other things, that the pound sterling was considerably weakened.
Since that time, however, the key figures shown few traces of a brexit-effect for the british economy. Stemningsindikatorene for both businesses and households picked up again after both had an immediate break after the referendum. In both the third and fourth quarter of last year, held also the gdp growth up 0.6 per cent on a quarterly basis, after the end of the 0.6 per cent also in the second quarter.
the Weakening of the pound is perhaps the sharpest impact of brexit-the result. In the course of the autumn the weakest level against the dollar in 31 years. The weak pound may perhaps explain why the activity in the british economy has held up well up even after the referendum.
Consumption will slow
Weaker exchange rate allows the country’s exporters and importkonkurrerende companies a konkurranseforbedring. The back of the medal is that imported goods become more expensive, which will eventually be able to turn out in the form of higher inflation. Higher inflation will therefore be able to influence the consumption negatively going forward.
“Domestic demand has been stronger than expected in the last few months and there have been relatively few signs of slowdown in consumption, so the committee expected after the referendum.Nevertheless, continued moderation in wage growth and higher import prices as a result of the pundets impairment likely to lead to markedly weaker realinntektsvekst for the household sector in the next few years. As a consequence, will in real terms, consumption will probably slow,” writes the central bank in the inflation report.
Inflation target
the central Bank points out that the weakening of the pound sterling is going to lead to inflation over the next few years are going to be higher than the central bank’s inflation target of two per cent.
Consumer prices were up 1.6 per cent on an annual basis in December and are scheduled to increase gradually over the next few years to a peak of 2.8 percent in the first half of next year for the page to fall back to around 2.4 per cent about two years, informs the central bank in the inflation report.
In the report makes the central bank it is clear that monetary policy must now be balanced between the requirement to keep inflation close to the target – that isolation pulls in the direction of higher interest rates and keep the job – and aktivitetsveksten up – which pulls in the direction of a still low interest rate. The committee therefore considers it is appropriate to use a longer time than normal to get back to the inflation target.
the Committee emphasises that there is still room to make monetary policy even more expansive if the consumer growth slows more powerful than expected. At the same time points out the that there is an upper limit to how high inflation can go before it must respond with tightening on monetary policy.
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