The United Kingdom exchange traded fund has been under pressure as the economy appears to be stagnating. The central bank has cut its economic forecast, and city riots are striking another blow at the weak economy.
Bank of England Governor Mervyn King is loathe to outline a specific monetary policy after the British Central Bank lowered its forecasts on inflation an the economy, reports Jason Douglas for The Wall Street Journal. The BOE, though, points to risks outside of the country, specifically the sovereign-debt crisis in the EU.
“The outlook for growth remains highly uncertain,” according to a BOE statement. “Were they to crystallize, the risks emanating from the euro area have the potential to have a significant impact on the U.K. economy.”
The Central Bank lowered its GDP forecast to 2% for 2011. Additionally, the BOE revised downward its inflation projection to 2% by May and slightly below 2% in 2013 as a result of lowering commodities prices and weakness in the labor market depressing wages.
“Once again the Bank of England has downgraded the U.K.’s growth forecast,” remarked Max Johnson, broker at Currency Solutions, according to MyIntroducer. “And rightly so: after nine months of stagnation, the economy is stubbornly refusing to pick up.”
Recent headlines coming out of the U.K. illustrate the massive riots in London and the subsequent looting and conflagrations that have been set off. British businesses have warned ministers that one in ten retail and leisure firms have been affected, reports Larry Elliot for The Guardian.
“These figures are horrifying in terms of the damage that has been done to an already struggling sector,” remarked the Local Data Company’s Matthew Hopkinson. “The retail sector is a major contributor to inner city regeneration projects as well as employing thousands of people.”
London home sellers cut their asking prices by the most in a year in August, Bloomberg reported.
iShares MSCI United Kingdom (NYSEARCA:EWU)
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Max Chen contributed to this article.