BoE with an interest rate decision today. What are the expectations with Brexit looming

The Bank of England’s job of predicting the future is getting more and more difficult as Brexit increasingly dims its vision.
The U.K. central bank will lay out how it expects the economy to perform over the next three years at noon on Thursday in London, and Governor Mark Carney will face questions on the topic from journalists. Yet two-thirds of its forecast period comes after the nation’s exit date from the European Union, and there is little clear indication yet as to what any alternate trading relationship might look like.
With the U.K. facing inflationary pressure that might require interest-rate hikes as soon as May, the BOE is left in a bind. The small optimistic tweaks to forecasts expected could be at best short-lived and at worst wildly off the mark. That risks undermining the credibility of an institution -- and an economics profession -- already accused by Brexit supporters of inherent bias.

Making bold assumptions at this point would be quite a risky game,” saidVictoria Clarke, an economist at Investec. “One of the key uncertainties and questions at the moment is how Brexit affects the supply side of the economy, and I don’t think they’re particularly clear on that.”
The projections will include an annual review of the supply-side potential of the U.K., predictions which have consequences for policy. That’s proved particularly true of late, with the reduced speed limit of the economy -- the pace of growth that can be tolerated without stoking prices -- a major reason why officials boosted borrowing costs for the first time in a decade in November.
Important as the forecasts are, Carney said last week that the BOE would have to reassess the assumptions in its projections once more concrete details about the U.K.’s deal with European leaders emerge. Silvana Tenreyro and Michael Saunders, two officials with strong but opposing views on the prospects for productivity growth, both admit that Brexit could throw their predictions off course.

There’s a certain irony in the actions of politicians limiting the BOE’s ability to forecast. The central bank has come under heavy criticism for its predictions before the Brexit vote, which some lawmakers say were overly gloomy.

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