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The Bank of England warns about the consequences of a "no deal"

2019-08-01T15:18:28.475Z

The Bank of England warns about the consequences of a "no deal"



London (AFP)

The governor of the Bank of England on Thursday alerted on the consequences of a Brexit without agreement and lowered the growth forecasts for 2019 and 2020, taking note of a cumbersome uncertainty in a degraded global economic context.

All planned measures in case of sudden exit of the United Kingdom from the European Union "can not eliminate the fundamental economic adjustments" that would generate such a scenario, warned Mark Carney, governor of the Bank of England (BoE) at the press conference following the institution's decision to maintain its policy rate at 0.75%.

"Whatever the outcome the country chooses, it is always better to have a transition," he said.

In its quarterly inflation report released on Thursday, the BoE reported that it now expects growth to reach 1.3 percent in 2019 and 2020, compared to 1.5 percent and 1.6 percent, respectively, in its previous monthly report. may. It nevertheless expects a rebound of 2.3% in 2021.

It explains this downward revision by Brexit's uncertainties and the slowdown in global growth which "should continue to weigh on growth in the short term and more sharply than was anticipated in the May report".

According to a survey by the BoE, more companies consider that the uncertainty of Brexit, now scheduled for October 31 after being postponed twice, will continue for several years. About 30% of the companies surveyed even think that the uncertainty will extend beyond 2020, which may weigh on investment in the country.

"Despite their better preparation, companies still expect their production, payroll and investment to fall by between 1% and 3% next year in case of Brexit without agreement," said the BoE governor.

The fears of a steep Brexit came to the fore with Brexiter Boris Johnson coming to power last week, who promised to leave the EU in late October no matter what.

"In the case of a Brexit without agreement, the exchange rate of the pound would probably fall, inflation would increase and GDP growth would slow," warned the BoE, although, for now, it does not make this assumption his central scenario.

The growing fear of a "no deal" has already passed on the pound, which fell on Thursday at a level unprecedented since 2017 against the dollar.

- The backlash of stocks -

As announced in June, the Bank of England now expects zero growth in the second quarter, after rising 0.5% in the first quarter.

"Official data on exported goods shows a sharp decline in the second quarter (which) probably reflects the weakness of global demand and the backlash of stockpiling in Europe in the first quarter," said members of the policy committee monetary policy of the central bank.

With a Brexit initially scheduled for March 29, many companies in the UK and the continent had increased their stocks as a precaution in the event of a supply chain disorder.

At the international level, BoE officials have observed that global growth remains "low", as American and European central banks have decided to relax their monetary policy.

For Paul Dales, an analyst at Capital Economics, the Bank of England has adopted a more accommodating tone while the rate increase mentioned in the event of an agreement "is now also conditioned to + some recovery in global growth +".

In addition, the BoE, which aims to raise prices by around 2%, has maintained its inflation forecast at 1.6% year-on-year at the end of 2019 and has increased by 0.1 point to 2.1% , the pace expected at the end of 2020.

© 2019 AFP

Source: france24

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