Yesterday the bank said it estimated this year the economy would grow 1.7% down from its previous forecast of 1.9% made in May. It also cut its forecast for 2018 from 1.7% to 1.6%.
The bank also announced that it was keeping interest rates at 0.25% after a 6-2 vote by its monetary policy committee. The rates have been at that level since August last year.
Speaking at a press conference yesterday, Mark Carney, governor of the Bank of England, said: “Since the referendum was called UK households and businesses and the financial markets have reacted at different speeds and to varying degrees to the prospects for the UK’s departure from the EU.
“Financial markets, particularly sterling, marked down the UK’s relative prospects quickly and sharply.”
He added: “Households looked through Brexit-related uncertainties initially but more recently the consequences of sterling’s fall have shown up in the shops and squeezed their real incomes and they have cut back on spending, slowing the economy.”
Carney said businesses were “somewhere in between” the gloomy outlook of the financial markets and the caution of households.
But warned that they had invested less aggressively than they would have usually done to an otherwise favorable environment.
He added: “The assumption of a smooth transition to a new economic relationship with the EU will be tested.”
The announcement from the Bank of England follows the release of the National Institute of Economic and Social Research’s economic forecast, which predicts the UK economy will grow 1.7% this year but will pick up by 2018 and grow 1.9% after a Brexit dip.
