The Bank of England is forecasting job losses and weaker growth despite the stimulus package announced today.
The BoE cut the base rate to 0.25 per cent and has expanded quantitative easing by £60bn to £435bn, including £10bn of corporate bond purchases. It has also suggested rate cuts could reach close to zero by the year’s end.
In its inflation report, also published today, the BoE says following the Brexit decision the exchange rate has fallen and “the outlook for growth in the short to medium term has weakened markedly”.
The bank says there will be “little growth” in the next months and that it will only pick up next year.
The bank downgraded its forecast for growth next year to 0.8 per cent, down from 2.3 per cent.
It is also predicting little growth in GDP in the second half of this year, with growth projected to slow to 0.1 per cent between July to September.
The rate of unemployment is expected to rise from its current 4.9 per cent to 5.5 per cent over the next two years.
Inflation is also expected to overshoot its 2 per cent target in 2018, rising to 2.4 per cent.
Bank of England governor Mark Carney says: “If we hadn’t taken the steps we have taken, output would be lower and unemployment would be lower. We would have achieved a poor balance in returning inflation to target.
“With all forecasts there are risks on either side. In the actions we have taken, through multiple channels, we have improved the economic outcome for this country. There will be less unemployment.”