Bank of England likely to delay rate hike as economy slows


Bank of England likely to delay rate hike as economy slows

Ian McCafferty and Michael Saunders, the two most hawkish members of the MPC, voted to increase the rate to 0.75%.

The Bank of England (BoE) today chose to keep interest rates at 0.5% in measured response to relatively weak economic data for 1Q2018.

The Bank of England (BoE) has downgraded its predictions for inflation and economic growth in Q2, as the prospects for the United Kingdom economy remain "clouded by Brexit uncertainty".

However, despite Carney's changing opinions, he's suggested numerous times that the economic data would need to back calls for a rate hike, which now, it doesn't.

Tom Stevenson, investment director for personal investing at Fidelity International, added: "Mark Carney really is the "unreliable boyfriend".

Carney defended himself against that charge, arguing that when the situation changes, the bank's policy response has to change.

Stuart Law, chief executive of business P2P lender Assetz Capital, said he wasn't surprised by the decision.

With global supply looking set to diminish further as a result of the U.S. re-imposing sanctions on Iran the mood towards the commodity-correlated Canadian Dollar remains generally positive.

"It's essential that customers are provided with options tailored to their specific needs, whether that's remortgaging, locking into a fixed rate or a product transfer, to secure a deal most suitable to them".

The announcement comes just weeks after observers seemed nearly unanimous in their predictions of a May rise in interest rates.

The Bank of England has elected to keep the interest rate at 0.5% despite continued speculation that a rise is imminent. Carney said what matters most is that the wider public still understands borrowing costs are headed gradually higher.

There was bad news, however, for 2018, with the bank saying that it expects growth of just 1.4% in the United Kingdom this year, compared to 1.8% at its previous forecast.

The text acknowledged that recent data points "towards some moderation" in growth, but stressed that data remained "consistent with a solid and broad based expansion of the euro area economy", with risks broadly balanced.

The second reason the central bank opted against another rate increase is that inflation has fallen more than anticipated. "The opportunity window for further rate hikes may have closed for the Bank of England", Dall'Angelo said. Well, rate hike odds for August were above 50% yesterday, now they have diminished and the market doesn't believe anymore that we will see a rate hike this year at all. Higher interest rates exert downward pressure on inflation, and lower interest rates push it up.

However, as with everything related to the British economy, much depends on the Brexit discussions.

With the issue of the UK's future relationship with the EU customs union still up in the air this decline in trade does not appear to bode well for the domestic outlook. "However what it will depend on is the degree to which the economy recovers from the Q1 dip and how it compares to the Bank of England's forecasts over the rest of the year".

Just this morning, the Royal Institute of Chartered Surveyors said London house prices had their worst month in a decade, and prices are predicted to continue falling.



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