Investing.com – After the Bank of England (BoE) kept rates on hold, while increasing inflation and growth forecasts for the British economy on Thursday, the BoE’s governor Mark Carney that its assumptions over the type of Brexit, as the exit of Britain from the European Union (EU) is known, that the U.K. would have had not changed, though he admitted that the British monetary authority now held a neutral stance on policy.
Asking himself the question about why the assessment made back in August was so far off, with third quarter growth of 0.5% handily beating the BoE’s forecast of 0.1%, Carney pointed to a stronger than expected consumption with “households appearing to look entirely through Brexit-related uncertainties”.
“Both consumption and housing have benefitted from a smaller drag from uncertainty and very supportive financial conditions,” Carney commented.
“These positives are neither solely due, nor totally unrelated, to the actions the MPC took in August,” he clarified.
In the light of the more positive outlook, the BoE raised its forecast for growth this year to 2.2%, from the prior 2.0%.
For 2017, it increased its projection for economic growth to 1.4%, from the earlier 0.8% estimated.
Going forward, Carney insisted that there was still considerable uncertainty surrounding the Brexit process and emphasized that “negotiations haven’t even begun”.
“We haven’t changed our assumption about what type of Brexit we’re going to have… at all,” Carney declared.
However, in a large shift from the September rate decision when a "majority of members" expected to support a further cut in the interest rate toward the lower bound this year, Carney indicated that the BoE’s stance was now “neutral”.
“Monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the target,” he said.