BOE cuts forecasts, says Brexit damage to economy has risen

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Carney said "not everything may be tied up in a nice package" by Brexit day.

If inflation remains muted, Das hinted there is more room to cut rates, sounding a markedly more dovish tone from the central bank.

The Reserve Bank of India's surprise decision to cut interest rates for the first time in 18 months on Thursday is a pre-election stimulus gift from a compliant central bank for Prime Minister Narendra Modi.

The Bank and Governor Mark Carney have ramped up their warnings over the worsening outlook for the global economy, and China in particular.

The U.K.is now just 50 days away from a March 29 deadline to leave the European Union, and an agreement for its new relationship settled has yet to be settled.

The central bank on Thursday slashed its 2019 economic growth forecast to 1.2 percent from a previous estimate of 1.7 percent made as recently as November.

That represented the biggest cut in its projections since the period immediately after the 2016 Brexit referendum and put Britain on course for its weakest economic growth in the 10 years since the global financial crisis.

This is being driven by sharp falls in business investment, as well as a drop in consumer spending and signs of a weaker United Kingdom housing market.

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For 2020, the overall economic growth outlook was also cut to 1.5 percent from 1.7 percent before picking up to a stronger-than-previously expected 1.9 percent in 2021.

Investors now see nearly no chance of a quarter-point rate move by the end of the year. Policymakers predict inflation will rise this year but remain within the RBI's target range.

The BoE kept its wage forecasts largely unchanged with earnings rising by more than 3 percent a year over the next three years.

But businesses and farmers - and even some of his own supporters - say it may be too little, too late to help the economy ahead of voting, which must be held by early May.

The BoE said on Thursday a survey it conducted of more than 200 businesses showed that half had begun to prepare for a no-deal Brexit, something a majority expected would cause the economy to shrink and unemployment to rise.

"If there is a lot of (government) pressure, then I may cut by a notional 5-10 basis points", said the head of a big state-run bank who asked for anonymity due to sensitivity of the subject. In a widely anticipated move, it also shifted its policy stance from "calibrated tightening" to "neutral", suggesting more cuts could be on the horizon.

The rate cut continues a trend in which some major central banks, anxious about slowing global growth and helped by cooling inflation, have moved firmly away from last year's tightening moves or tones.

Mark Williams, Chief Asia Economist of Capital Economics in London, said there was a growing perception that the central bank had allowed its focus on controlling inflation to slip, and therefore higher inflation and higher interest rates were likely over the long term.

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