UK economy: More reasons to be cautious than optimistic
Schroders' Fixed Income Fund Manager, Alix Stewart, comments on the outlook for the UK economy following the Bank of England's inflation report and interest rate decision today:
“The Bank of England has made some fairly optimistic assumptions regarding UK growth and the return of wage inflation. As the Bank recognises, however, these are based on the UK’s exit from the European Union being smooth. Given recent political headlines this is certainly not a given.
“It’s also worth noting that the UK’s economy has been supported since last June’s referendum vote by the Bank’s decision to cut interest rates and extend quantitative easing, as well as by the depreciation of the pound. With these factors in mind, it is hard to ascertain the underlying strength of the UK economy at this point. So we remain cautious on how rosy the picture looking ahead really is. For example, until businesses know what Brexit will look like they are likely to hold back on investment decisions.
“A conclusive election result next month may help in this regard but there remains more reasons to be cautious on the UK than optimistic at this point.”
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