/Bank of England: ‘Entrenched uncertainty’ around Brexit holding back UK economy

Bank of England: ‘Entrenched uncertainty’ around Brexit holding back UK economy

The Bank of England said the U.K. will likely avoid a recession, but Brexit could still cause stress for the economy | Daniel Leal-Olivas/AFP via Getty Images

Policymakers say the UK will avoid recession this year but Brexit remains a drag on the economy.

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9/19/19, 1:18 PM CET

Updated 9/19/19, 1:27 PM CET

LONDON — The “entrenched uncertainty” around the timing and nature of Brexit is threatening the British economy in the long term, the Bank of England said Thursday as it announced key interest rates will stay at 0.75 percent.

The country is likely to avoid a recession after the economy shrunk 0.2 percent in the second quarter but is estimated to grow at the same pace between July and September.

However, the BoE warned, further scheduled car factory closures in October and November risk “pushing down” growth again.

“It is possible that political events could lead to a further period of entrenched uncertainty about the nature of, and the transition to [Brexit],” the Bank said in its monetary policy report. “The longer those uncertainties persist, particularly in an environment of weaker global growth, the more likely it is that demand growth will remain below potential.”

Meanwhile, thus far strong employment growth seems to be flatlining, the report said, raising further concerns about the economy.

Ramped-up U.K. government spending announced earlier in the month was likely to add 0.4 percent to the economy over the next three years, the Bank estimated.

The economic slowdown in the eurozone and fears of recession in Germany, coupled with the increasingly intense trade war between China and the U.S., are the most important external factors influencing the U.K. economy, according to the minutes of the monetary policy committee meeting of September 18, published Thursday.

A rise in interest rates is less likely in the near term than it was in August, the Bank of England said.

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