Firmer evidence needed for Aug rate cut: UK central bank

BLOOMBERG

Bank of England policy maker Martin Weale said he needs to see more evidence of the impact of the U.K.’s vote to leave the European Union before supporting additional stimulus at the central bank’s August meeting.
BOE officials surprised markets and a majority of economists last week when they kept their key interest rate unchanged, and suggested they might act at their Aug. 4 decision instead. Yet, Weale said in a speech in London on Monday that the bank “is not a nurse to markets.”
“Uncertainty points to the argument that we should wait for firmer evidence before making any policy change,” Weale said. “The argument in the other direction is that, while I am very uncertain about the magnitude of the effect, it does seem to me quite likely that demand will weaken more than supply in the near term. So is there a case for a stitch in time?”
Weale’s comments are in line with minutes of the Monetary Policy Committee’s July 14 meeting, which showed a bias toward waiting for deeper analysis. While the amount of data covering the period following the referendum remains limited in the next three weeks, the August gathering will feature new quarterly economic projections and a press conference, giving Governor Mark Carney the chance to fully explain the MPC’s actions. Traders are pricing in around a 90 percent probability of a rate reduction at the meeting.