BoE: UK Economic Outlook Deteriorated Significantly

RTTNews · 06 Jul 2022 81 Views

The outlook for the UK as well as global economies deteriorated materially but domestic vulnerabilities that can amplify economic shocks remain broadly at their pre-pandemic levels, the Financial Policy Committee of the Bank of England said Tuesday.

The steep rises in energy and other commodity prices exacerbated inflationary pressures arising from the pandemic, and further disruption of supply chains, the bank said in its Financial Stability Report.

Market interest rates and corporate bond spreads increased sharply, reflecting expectations of further policy tightening in response to renewed risks of more persistent elevated inflation and increasing credit risk.

Further, the FPC assessed that major UK banks have considerable capacity to support lending to households and businesses even with the deterioration in the economic outlook.

The committee increased the UK Countercyclical Capital Buffer rate to 2 percent. The bank said it stands ready to vary the CCyB rate in either direction.

The FPC noted that household debt relative to income has remained broadly flat in recent quarters. Nonetheless, the rise in living costs and interest rates will put increased pressure on household finances in coming months.

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