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BoE's Ramsden More Pessimistic On Growth Outlook

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Bank of England Deputy Governor Dave Ramsden said on Thursday that he was more pessimistic on the UK economic growth forecast than the central bank, and cautioned that a "no-deal, no-transition" Brexit would be the biggest risk to the economy.

Ramsden said he is more pessimistic on GDP growth forecast than his colleagues on the Monetary Policy Committee. The policymakers sees more downside risks to productivity and is less optimistic about the recovery in investment.

"Those two risks broadly offset each other in terms of the balance of demand and supply, meaning that my best guess for inflation, and the outlook for policy, is in line with the central view," said Ramsden.

A Brexit outcome of no deal and no transition is unarguably the biggest risk to the UK economy and financial stability, he said. This would have large negative economic effects.

In case of a disorderly no-deal Brexit scenario, Ramsden said it is impossible to predict exactly what would happen in advance. "I would want to wait and see how the situation unfolded," he added.

"The response would not be automatic and could go either way: rates could go up or down as the situation demands," he said.

If Brexit undergoes smoothly, then BoE will raise interest rates to contain inflationary pressure.

"If we get a smooth Brexit with a transition deal, as assumed in the MPC's latest Inflation Report forecast, I expect growth to pick up, leading to excess demand and building domestic inflationary pressure, so that further monetary tightening is appropriate to maintain monetary stability," Ramsden said.

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