The Bank of England said Britain faces its weakest economic growth in a decade this year as uncertainty over Brexit mounts and the global economy slows, but stuck to its message that interest rates will rise if an EU divorce deal is done.

BoE Governor Mark Carney said "the fog of Brexit" was causing tensions in the world's fifth-biggest economy, and that the risk of an abrupt, economically damaging departure from the European Union was growing.

"There are still as almost as a wide of range of possibilities as there were the morning after the referendum," Carney said after the Bank's policymakers voted unanimously to keep rates at 0.75%, as expected.

Britain is due to leave the bloc on March 29 but Prime Minister Theresa May wants more concessions from Brussels to rally her divided Conservative Party behind her exit plan, which parliament voted against last month.

Interest rate futures indicated investors slightly scaled back their expectations for a rate hike this year. But in our opinion a rate hike this year remained a possibility.

The central bank slashed its 2019 economic growth forecast to 1.2% from a previous estimate of 1.7% made as recently as November. That was the biggest forecast cut since immediately after the 2016 Brexit referendum.

The BoE sees business investment and housebuilding falling this year and a halving of the growth rate in exports.

For 2020, the BoE also lowered its overall outlook to 1.5% from 1.7% before a stronger-than-previously expected 1.9% in 2021.

The downgraded growth expectations coincided with the Bank acknowledging that investors had scaled back their expectations on how much interest rates were likely to rise.

The BoE said that in the run-up to today's announcement, markets were pricing in its Bank Rate reaching 1.1% by the end of 2021, compared with 1.4% at the time of its last forecasts in November.

The BoE sent a reminder to investors that rates might rise more quickly than they expect by saying it saw inflation in two years' time at 2.1%, a touch above its 2% target. The main reason the BoE thinks underlying inflation pressures will build is faster wage growth after Britain's unemployment rate hit its lowest level in more than 40 years. The BoE's wage forecasts were little changed with earnings rising by more than 3% a year over the next three years.

But the bigger picture remains weak. Private-sector business surveys have suggested the economy has slowed to a crawl and the BoE said on Thursday that half of the businesses it surveyed had begun to prepare for a no-deal Brexit.

It repeated its message that it could either cut or raise interest rates after a no-deal Brexit.

Significant rebound out of a 1.2854 low. Long lower wick on today’s candlestick raises the question about potential for a further reversal. A close above 1.2928 will strengthen expectations for a recovery in the coming days. Market once again eyes 200-day moving average, 1.3034.

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