The British pound fell to its lowest level in a week on Thursday, after a hotly-anticipated announcement from the Bank of England cut the UK’s 2017 growth forecast.
The Bank cut its growth forecast to 1.9 percent, and held interest rates at 0.25 percent. The figure is a point lower than the 2.0 percent estimate made in February.
The Bank’s Quarterly Inflation Report also raised its forecast for inflation this year to 2.7 percent, up from its February forecast of 2.4 percent, attributing the rise “entirely” to the impact of the weak sterling.
The pound sunk further on the ‘Super Thursday’ announcement from the Bank, after Bank of England governor Mark Carney confirmed at the press conference that the weak UK wage growth in recent years is likely to persist, with real earnings set to fall this year.
The pound is currently trading down 0.57 percent against the dollar and 0.39 percent against the Euro (1320GMT).
Tom Stevenson, investment director for Personal Investing at Fidelity International, said there were “no big surprises” in the Bank of England’s announcement.
“The weak pound since Britain’s vote to leave the EU has seen inflation surge in recent months with a weaker sterling pushing up the price of imported goods. For now, it seems the Bank of England will be sitting tight on a rate rise given the headwinds the UK economy faces and the strengthening of the pound.
“Mr Carney remains of the view that the Brexit negotiating period will be extremely challenging for the UK economy, but today’s announcement introduces a more hawkish tone than we have seen previously,” Stevenson concluded.