The Bank of England on Thursday slashed its forecast for UK growth this year to 1.2 per cent from 1.7 per cent, blaming the downgrade on a global economic slowdown and "the fog of Brexit".
"UK economic growth slowed in late 2018 and appears to have weakened further in early 2019," the BoE said after keeping its main interest rate at 0.75 per cent.
"This slowdown mainly reflects softer activity abroad and the greater effects from Brexit uncertainties at home," it added.
"Although many companies are stepping up their contingency planning, the economy as a whole is still not yet prepared for a no-deal no-transition exit," Carney told a press conference to elaborate on the BoE's latest forecasts.
"The fog of Brexit is causing short term volatility in the economic data and more fundamentally it is creating a series of tensions in the economy. Tensions for business," he added.
Plans for Britain to leave the EU on March 29 under a withdrawal agreement signed last year were thrown into doubt when British lawmakers overwhelmingly rejected the accord last month.
Meanwhile should British GDP come in at 1.2 per cent, it will be the country's weakest output in a decade.
In November the BoE had forecast 2019 growth of 1.7 per cent.
"Brexit uncertainties had intensified considerably since the Committee's November meeting," the BoE said Thursday.
"The economic outlook will continue to depend significantly on the nature of EU withdrawal," it added.
The BoE also slashed its forecast for 2020 UK growth -- to 1.5 per cent from 1.7 per cent.
The downgrades sent the pound sinking under USD1.29, while the euro rebounded close to 88 pence.
Output in Britain's dominant service sector almost ground to a halt in January, data showed this week.
The IHS Markit/CIPS UK services purchasing managers' index (PMI) fell to 50.1 -- the lowest level in two and a half years -- down from 51.2 a month earlier.
A PMI reading above 50 indicates growth.
Concerns about Britain's impending departure from the EU dampened demand and caused firms to delay making decisions on new projects.
Britain is meanwhile not alone in experiencing a cooling economy.
In the US, the Federal Reserve last month left its key lending rate unchanged and said it would be patient about making any further changes, in a clear signal that the central bank has heeded concerns about the economy.
A slowdown to China's economy has also rattled markets in recent months.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)