Bank of England keeps rates at record low as economy slows

Economic growth pulled back sharply to 0.3 per cent in the first three months of the year, from 0.7 per cent in the previous three months after a sharper-than-expected fall in consumer spending.

It expects nearly no increase in real incomes this year and sluggish consumer spending, though that will be offset by investment and exports.

Eurozone industrial production data from March will also be published, but Bank of England news and German growth data is most likely to influence the Pound to Euro exchange rate for the rest of this week.

Inflation is running above the BoE's target of 2 percent and is widely expected to hit 3 percent later this year, which has made some policymakers uneasy.

Latest forecasts from the National Institute of Economic and Social Research predict inflation will peak at 3.4% in the final quarter of 2017, although it said the Bank would "look through" this and likely keep rates on hold for another two years.

The UK economy shrugged off expectations of a recession after last year's referendum, and chalked up one of the fastest growth rates among major rich economies.

And over the three year forecast period, it is more bullish. The Resolution Foundation think tank noted that 40 percent of the British workforce have been affected by falling wages so far. German growth and inflation data on Friday could receive some attention this week.

Almost a decade of pay stagnation and freezes, the prevalence of zero-hour contracts-amid a mushrooming of the lowly paid and highly exploitative "gig economy"-means one third of the population are now officially below the poverty line, while more than half of all households depend upon state benefits".


"It is therefore likely that retailers will have to up their prices in coming months in order to compensate for rising input costs and protect their profit margins which would exert additional pressure on already tight household budgets". That, in turn, is weighing on consumer spending this year.

Speaking at a press conference after the announcement, BoE Governor Mark Carney said higher inflation was a direct reflection of the fall in sterling as the market re-priced the UK's medium term prospects. In fact, the average household now owes around £13,000, excluding mortgages, and total unsecured debt is at an all-time high of £349 billion.

Shares of Snap Inc. tumbled after Wednesday's close after its first quarterly report as a public company showed it struggled to maintain user growth. This slide in sterling is making itself felt in the real economy by pushing up the price of imported goods.

But he said wages were falling partly because firms are anxious about trading prospects outside the European Union, causing them to offer "more modest pay settlements". "Investors are more willing to move into the market, and less skittish to downturns".

While the living standards of large sections of the working class are deteriorating post-Brexit, stock markets continue to show near record highs. Growth was predicted to slow next year to 1.7%, little changed from February's 1.6% prediction.

Some analysts have taken this as an urge towards UK Prime Minister Theresa May, to get a UK-EU deal rather than Brexiting without any deal at all. The trade deficit was the largest since September.

"The next government must truly get behind a new industrial strategy to drive growth and job creation across the United Kingdom and also deliver a new migration system that ensures firms have access to the skills and labour they need post-Brexit".

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