U.K. Fiscal Boost Is a Headache for Carney and the BOE

U.K. Fiscal Boost Is a Headache for Carney and the BOE

(Bloomberg) -- The fiscal giveaway in the U.K. budget strengthens the case for a near-term interest rate hike, but with Brexit talks at a critical stage, it’s unlikely to be enough for the Bank of England to take a hawkish turn this week, according to Bloomberg Economics. The stimulus package could lift economic growth by 0.3 percentage point next year and raise the level of output by 0.4 percent by 2021 -- the end of the central bank’s forecast horizon. While the BOE is unlikely to have factored the Budget numbers into its forecast, the loosening means policy makers led by Governor Mark Carney will probably lean even more heavily on Brexit uncertainty as the reason for keeping rates on hold.

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