LONDON (AP) – The Bank of England says a rise in inflation driven by the market turmoil over Brexit is starting to hurt consumers, weakening growth and pushing the central bank to keep its interest rates at record lows.
The bank on Thursday kept its main interest rate at 0.25 percent as it noted that the economy will be weaker than expected this year as Britain prepares to leave the European Union.
Since the Brexit vote in June, the pound has fallen as much as a fifth in currency markets, pushing up inflation in Britain. That, in turn, is weighing on consumer spending this year.
“Wages won’t keep up with the price of goods and services,” Bank Governor Mark Carney told a news conference as he presented new economic forecasts.
The Bank of England predicts the annual inflation rate will rise to 2.7 percent by the middle of this year, up from the current rate of 2.3 percent and pushing the official limit of close to 2 percent. It trimmed its forecast for growth to 1.9 percent from 2.0 percent previously.