Interest Rates Announcement Would be ‘Foolish’

The Bank of England has made a decision to hold UK interest rates at 0.5 percent.

But, today is a little different as the Bank will publish its decision on rates, the minutes from the Monetary Policy Committee which came to that decision and its inflation report all at the same time. That was followed by the Bank’s quarterly inflation report.

And if the Bank sounds more optimistic that Britain’s productivity record is at last strengthening, it would be taken as a sign that faster recent pay growth is seen as a less potent inflation threat.

Those expectations are for the BOE to begin lifting its benchmark short-term rate from 0.5%, where it has been pegged since early 2009, in the first half of 2016.

The data is expected to ease pressure on Bank of England policymakers to start raising interest rates.

However, the euro has slid about 10% against sterling in the past year and though “chunky”, yesterday’s intra-day move may not erode too much of the price gains for Irish exporters, said Philip O’Sullivan, chief economist at Investec Ireland.

Bank of England (BoE) governor Ben Broadbent has said he and his colleagues are responding to unpredictable events, making it impossible and foolish to pre-announce the date of an interest rate rise. “The most striking development in the UK over the past year has been the fall in CPI inflation, which edged back down to zero percent in June”, Carney said at his news conference.

McCafferty, along with fellow hawk Martin Weale, voted for a rise in Bank Rate last autumn then later changed their minds due to low inflation.

However, Williamson said a rate hike later this year remained a “distinct possibility”, as members would want to see stronger data than the latest PMI readings before feeling comfortable about voting for higher borrowing costs.

“Today’s releases support our view that a majority will vote to keep interest rates on hold until the second quarter of next year”, said Samuel Tombs, senior United Kingdom economist at Capital Economics in London.

But a collapsing stock market in China and ongoing talks over Greece’s debts mean the outlook for global growth is muted.

“The governor’s remarks about inflation shooting through the target in two years’ time imply that rates could rise ahead of current market expectations”.