Inflation and growth expectations increased

The Bank of England (BoE) has increased its forecasts for growth and inflation next year, expecting inflation to hit 2.7% which is almost triple the current rate of 1%, while economic growth is forecast to rise to 1.4% from 0.8%. This was indication that the option of a further interest rate cut this year is almost certainly off the table. Drivers of this sharp increase in inflation expectations are the slide in the pound since the EU referendum, increasing the cost of imports, as well as the rise in the price of oil since early this year. The pound, which had received a boost earlier in the day after the high court ruled that parliament should have a say over the triggering of article 50, strengthened further against the euro and the dollar after the BoE’s statement.