BoE Now Predicts a Milder Recession Contrary to Its Previous Forecast

The Bank of England had previously predicted that the UK economy will enter a prolonged recession on record. But since the British economy is seeing a quick recovery with an unexpected increase in GDP by 0.1% in the month of November, the economic outlook has become more optimistic. Now BoE has released a revised forecast which suggests that the recession will be mild and won’t last for a long time like they expected earlier. The shallower recession prediction has changed the market mood for all GBP currency pairs.

Another good news is that the Bank is expecting a significant drop in inflation rates by the end of 2023. They clearly said that, “Annual CPI inflation is expected to fall to around 4% towards the end of this year, alongside a much shallower projected decline in output than in the November Report forecast.” The main bank interest rate has become 4% after the MPC voting as 7-2 members voted in favour of the second consecutive half point rate hike.

The raise of interest rate by 50 basis points was announced on Thursday and it was widely expected and by all experts based on the current situation of the British Economy. The upcoming US NFP release will be another major determinant that will leave an effect on all major currency pairs. But as of now the Bank of England is giving hints about a smaller interest rate hike of 25 points in the next meetings.

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