Market News
Pound slides on BoE rate cut as investors fret about 'stagflation' - REUTERS
By Harry Robertson, Naomi Rovnick and Greta Rosen Fondahn
Summary
- Pound drops 1% as BoE cuts, slashes growth outlook
- BoE sharply raises inflation forecasts
- Investors worry about potential "stagflation"
Feb 6 (Reuters) - Investors grappled with a gloomy set of Bank of England forecasts on Thursday that complicate the outlook for UK assets, with sterling set for its biggest one-day fall in four weeks even as bond yields held broadly steady.
The BoE lowered rates to 4.5% and halved its growth forecast for this year to 0.75%. But it said inflation would rise "quite sharply" to peak at 3.7% this year, well above a previous estimate.
"With growth under threat and inflation remaining higher than hoped, that provides a combination that is likely to see the word 'stagflation' being bandied around," said Premier Miton Investors CIO Neil Birrell.
BoE Governor Andrew Bailey rejected the idea that Britain was experiencing a period of "stagflation", a term coined to describe a combination of high inflation and weak economic growth, saying underlying inflation remained on a downward path.
