BOE Offers Upbeat Economic View as Officials Split on OutlookBy
Report says companies’ investment intentions have risen
Currency effect peaked, though inflation still picking up
The Bank of England presented a relatively upbeat view of the U.K. economy, seeing moderate growth and strengthening investment intentions, just a day after Governor Mark Carney emphasized his concerns about the impact of Brexit.
A report by the BOE’s regional agents published Wednesday said the weaker pound and stronger global growth are supporting manufacturing and exports and the currency’s effects on companies’ costs “may have passed their peak.”
Even so, it warned that higher costs are still feeding into retail inflation, leaving consumers less able to make big-ticket purchases, and uncertainty is weighing on some businesses’ willingness to invest.
The agents’ findings underline the disconnect between some forecasts for a slowdown and a resilient business landscape. There are also divisions within the BOE’s Monetary Policy Committee. Carney’s dovish comments on Tuesday came after a meeting last week where a minority of three MPC members unexpectedly voted to increase interest rates, saying the surge in inflation outweighs the risks to growth.
The report also said firms are seeing increased difficulty recruiting staff, and labor market conditions have tightened. Nevertheless, employee costs are “subdued,” with wage settlements clustered around 2 percent to 2.5 percent. Carney, who described wage growth as “anemic” on Wednesday, has said he wants to see it begin to pick up before raising rates.