Bank of England’s Forbes sees no case for further rate cut

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Top rate-setter opposes further interest rate cuts

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LONDON, Sept 22 (Reuters) – Bank of England policymaker Kristin Forbes said she did not yet see a case for a further interest rate cut to help Britain’s economy after June’s vote to leave the European Union, putting her at odds with the majority of her fellow rate-setters.

Forbes, an external member of the BoE’s Monetary Policy Committee, last month voted in favour of a cut in rates to a record low 0.25 percent but opposed restarting purchases of government bonds.

Last week the BoE said the economy appeared to be slowing less rapidly in the short term than it expected in August, but it also said most policymakers still thought the longer-term outlook warranted another rate cut later this year.

In a speech due to be delivered on Thursday, Forbes said she believed August’s rate cut and measures to support bank lending were probably sufficient for now.

“The initial effect on the UK economy of the referendum has been less stormy than many expected,” she said. “Looking forward, I am not yet convinced that additional monetary easing
will be necessary to support the economy,” she added.

(Writing by David Milliken; editing by William Schomberg)

Copyright(c) Thomson Reuters 2016.

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DEBATE: Three months on from Brexit, has it benefitted UK business?

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Accountancy software firm heads Ed Molyneux of FreeAgent and Lee Murphy of Pandle debate whether the Brexit vote was a big blow to business

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Ed Molyneux, co-founder and CEO of FreeAgent says: “Following the referendum result I believed that ‘Brexit’ would be a big blow to the UK’s micro-business sector and I still believe this to be the case.”

“In the run up to the vote, the overwhelming majority of micro-business owners and freelancers were in favour of the UK remaining in the EU because they didn’t think a ‘Brexit’ would be beneficial for their own businesses or the economy in general.”

“Three months on from the vote, micro-businesses, which comprise around 95% of the UK’s total number of companies, have seen no immediate advantages from Britain’s decision to leave the EU. These businesses are actually in a state of limbo instead, as they are in for a lengthy period of uncertainty while negotiations take place over the terms of the UK’s exit.”

“I would urge the government to be as swift as possible in providing updates about how these discussions are progressing, and give every business owners in the UK clear, up-to-date information about what the effects of Brexit, whenever it does happen, will be on important issues such as trade and tax. British micro-businesses cannot be kept in the dark, given their immense contribution to the economy.”

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“Despite the fallout from Brexit many European businesses are still looking to set up shop in the UK,” counters Lee Murphy, owner of Pandle.

“Undoubtedly a few European business owners have been apprehensive about setting up in the UK because of Brexit, but as a firm we’re still taking on a lot of European clients. I believe the impact of the UK leaving the EU will be even less severe in the long term as it’s very unlikely that the EU would prevent reasonably free trade with the UK as it’s the biggest importer of European goods – at around 16% of all European exports.”

“British SMEs are resilient, and in recent years exports from the UK to non-EU countries have grown at a much faster rate than UK goods exports to the EU states. In fact, since 2007 we’ve seen exports of goods to non-EU countries rise by 54%, whilst goods exports to EU countries rose only by 15%.”

“At the moment trade agreements cannot be made with the UK directly, but rather with the EU as a whole. So post-Brexit, it’s likely the UK will make trade deals with preferred partners on terms which UK businesses can benefit from.”

“It’s important that, three months on from Brexit, small businesses don’t lose faith in the British economy and continue to prosper – as they have, and always will.”

“At the moment trade agreements cannot be made with the UK directly, but rather with the EU as a whole. So post-Brexit, it’s likely the UK will make trade deals with preferred partners on terms which UK businesses can benefit from.”

“It’s important that, three months on from Brexit, small businesses don’t lose faith in the British economy, and continue to prosper – as they have, and always will.”

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ECB says China and Brexit pose risks to global growth

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Big emerging market economies and Britain’s decision to leave the EU set to affect global growth

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FRANKFURT, Sept 22 (Reuters) – Global growth is likely to accelerate next year but the outlook is fraught with risks, particularly from big emerging market economies including China, and Britain’s decision to leave the EU, the European Central Bank said on Thursday.

Global growth will motor along but the recovery will be gradual and uneven with heightened uncertainty, even as the United States, the world’s biggest economy, is expected to recover, the ECB said in a regular economic bulletin.

“A key downside risk is a stronger slowdown in emerging markets, including China,” it said. “A tightening of financing conditions and an increase in political uncertainty could exacerbate existing macroeconomic imbalances, denting confidence and resulting in an unexpectedly strong slowdown.

The bulletin was largely consistent with the outlook presented at the ECB’s September rate meeting. “Policy uncertainty surrounding the economic transition in China could lead to an increase in global financial volatility,” the ECB said. “Continued emphasis on rebalancing the economy – including reductions in overcapacity in some heavy industries and action to address non-performing loans – is expected to result in a decline in the pace of economic growth,” it added.

Although Brexit has so far had limited impact and some analysts have lifted their gloomy forecasts, the ECB warned that the worst may not be over. “The economic implications of the United Kingdom leaving the European Union could be worse than expected, increasing uncertainty and negatively affecting trade, business confidence and investment,” it said. Although monetary and fiscal accommodation should support the British economy, the institutional and political uncertainty surrounding the negotiations are expected to dampen domestic demand, particularly investment, even if the short-term impact has been modest, the bank said.

Reporting by Balazs Koranyi.

Copyright(c) Thomson Reuters 2016.

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