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May 2016

Stark warning from Carney

Published: Thursday 12 May 2016

The Bank of England today warned of the effect of a Brexit on growth and inflation as Governor Mark Carney said that leaving the EU could hit economic activity. The Pound also could fall further which would increase inflation risks. The central bank lowered growth forecasts for the year to 2.0% from 2.2% at the February quarterly inflation report, and to 2.3% next year from 2.4% in Feb.
 
The MPC voted unanimously to keep interest rates at 0.5% with the futures market pricing in a 28.8% chance of an interest rate cut before the year end, compared t0 40% chance before the meeting. The Pound has rallied after the announcement partly due to dire warning from Bank of England. Analysts also suggest that those wavering voters would be persuaded to vote to stay in the EU. The Bank of England sees inflation higher and improved growth in the event of the Remain vote winning.  
 
Latest FX news by Alastair Sweetman

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