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Bloomberg
Bank of England (BOE) policy makers will probably keep policy on hold despite warnings that interest rates will have to rise in the future.
All but one of the 20 analysts surveyed by Bloomberg predict a unanimous vote to keep the benchmark at 0.75%. Political turmoil, a lack of clarity about Britain’s departure from the European Union, weaker-than-expected economic data and signs the US Federal Reserve is on course to reverse its recent hiking path, provide reasons to stay their hand.
An eighth straight unanimous decision may mask more diverging views among the MPC though. In a speech, Michael Saunders indicated that he sees no need to wait until all political uncertainty around Brexit is resolved before raising rates, while chief economist Andy Haldane said the time is nearing when a hike is needed to keep inflation pressures in check.
On the other side of the argument, Gertjan Vlieghe said global and domestic risks had intensified in the past month and the outlook “has got a little worse†since the MPC’s last decision and forecasts in May. Then, Governor Mark Carney said the BOE stands ready to raise rates by more than
investors are predicting if the UK successfully manages a smooth Brexit.
Figures this week showed a larger-than-expected slowdown in growth in April, and the National Institute of Economic and Social Research predicts the economy is likely to contract 0.2% in the second quarter. Meanwhile, purchasing managers indexes for May showed contractions in construction and manufacturing, and retail sales in a slump, leaving the economy “close to stagnation,†according to IHS Markit.