Bank warns of no-deal recession

RBI cuts repo rate in first policy review under new governor

Bank of England Governor Mark Carney speaks during the Bank of England's financial stability report at the Bank of England in central London on November 28, 2017.

The minutes go on to say that if the economy were to develop as expected, monetary policy would be tightened "at a gradual pace and to a limited extent".

Investors now see nearly no chance of a quarter-point rate move by the end of the year.

He said half the businesses surveyed by the Bank of England are "not ready for such a possibility" and that "on balance respondents expect United Kingdom output, employment and investment to contract substantially if it were to occur".

The ruling Bharatiya Janata Party is already in an election mode. Among the voters' biggest concerns are the impact of low farm prices on rural incomes and whether there is enough job creation.

But it still wasn't enough, he said.

While some economists did argue that the key driver of expectations for a further rate cut ahead of the election is pressure from the government, about 85 percent of respondents who answered a separate question said the one just delivered was not a mistake.

The monetary policy committee of the Reserve Bank of India held a maiden meeting under recently-appointed Governor Shaktikanta Das.

The RBI also eased bank lending restrictions for non-banking finance companies and raised the limit on "collateral free" farm loans in an attempt to boost lending to almost 120 million rural households. We now think the central bank will be reticent to move until it knows for certain that any near term weakness has dissipated.

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He announced a number of high-profile policies, including the introduction of a new single tax on goods and a controversial currency ban.

The shift in monetary policy comes nearly a week after Modi's government unveiled a budget packed with measures sure to please many voters, including fresh tax breaks for middle-class families and payments to India's struggling small farmers.

In November the BoE had forecast 2019 growth of 1.7 per cent.

"The rate cut was due, but the timing was a surprise".

But the faster-than-expected move isn't likely to help the economy much, they said. The report adds that there is now a 25% chance of a recession this year.

And banks are reluctant to cut deposit rates in the fiscal year's last quarter, as they are keen to shore up their books while not losing hefty deposits. A sharper-than-expected slowdown in the global economy is also impacting United Kingdom growth, according to the Bank.

The rate cut also underlines fears about slowing economic growth.

Statistics showed the economy expanded only 7.1 percent on-year in July-September, down from 8.2 percent in the previous quarter.

That revision marks the most important reduce of its development forecasts for a reason that interval instantly after the Brexit referendum in 2016.

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