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Bank of England's Carney likely to stress virtue of patience

Bank of England's Carney likely to stress virtue of patience

But forecasts were raised for future years as the Bank indicated turbulence would be shortlived. He told reporters: "This is going to be a more challenging time for British households over the course of this year".

'The rate of inflation is expected to rise from 2.3 per cent per annum in March to nearly 3.5 per cent by the end of 2017'.

However, forecasts for 2018 and 2019 were revised up from 1.6 per cent and 1.7 per cent to 1.7 per cent and 1.8 per cent respectively.

Carney said the central bank did not prepare any forecasts based on the assumption of no new trade deal with the European Union, leaving uncertain what the economic impact would be.

Speaking in his regular press conference after today's Inflation Report, however, Mr Carney was very cautious not to offend.

It raises questions as to whether the Bank's predictions are providing too optimistic a view of Brexit negotiations with the EU.

Mr Carney said the MPC also issued its forecast assuming a "significant pick-up in wage growth", due in part to business concerns over the Brexit process starting to ease.

"It is possible that some of the recent weakness is a effect of companies' uncertainty about the outlook, with some unwilling to raise wages at a faster pace until they have more clarity about their future costs and markets", the Bank said. In particular, wage growth has been notably weaker than expected.

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Deputy governor Ben Broadbent insisted the pain for households, amid lower wage growth and higher inflation sparked by the collapse of the pound, would let up over the next three years.

"That means the next government must truly get behind a new Industrial Strategy to drive growth and job creation across the United Kingdom and also deliver a new migration system that ensures firms have access to the skills and labour they need post-Brexit".

The pound slumped on the news, falling 0.4 per cent against the USA dollar to below 1.28.

It plunged 0.6% against after the bank released its forecast Thursday.

In the report, the Bank cautioned the expected slowdown in consumer spending "may have started". Aggregate demand slowed markedly in 2017 Q1, and the MPC's central projection contained in the May Inflation Report is now for quarterly growth to remain around current rates, and close to trend. That's pushing up inflation, which is now 2.3 per cent annually, within the central bank's goal of about 2 per cent. Analyst Alan Clarke at Scotiabank has predicted that despite the pound's recent rebound, inflation will rise above 3 per cent this year.

In other economic news, leading think tanker, NIESR estimated that UK's gross domestic product (GDP) advanced 0.2% in the three months to April 2017, whereas investors had envisaged for a rise of 0.4%.

Pay packages of many FTSE 100 chief executive officers are partly tied to how well share prices are doing rather than the CEO's performance - and some stocks are soaring. ritish equities got a boost since the June vote because the likes of Rio Tinto, Smiths Group and WPP generate most sales overseas and earn a fortune when they convert these revenues back into the weakened pound.

Sterling has strengthened this year after its precipitate fall following the Brexit vote.


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