Bank of England: Hold fire until there is Brexit certainty says the shadow MPC
City economists are all but certain that the Bank of England will hold interest rates steady today, only six weeks after raising interest rates and with the Brexit endgame fast approaching.
The Bank’s rate-setting monetary policy committee (MPC) will announce its latest decision at midday, with all eyes on any tweaks to guidance around the future path of interest rates. The vote will be led by Mark Carney, whose term as governor was extended this week until 2020.
Data since the MPC last met has for the most part strengthened the Bank’s justification for raising interest rates, with regular pay growth accelerating to the joint fastest annual rate since 2015, at 2.9 per cent. Meanwhile, July growth figures showed a stronger-than-expected expansion in output from the UK economy.
Economists will read the MPC’s statement closely for guidance on spare capacity in the economy. Meanwhile, a message that inflation will accelerate further would likely be taken as hawkish by investors.
Morning Wire's shadow MPC
Jeavon Lolay, Lloyds Bank Commercial Banking
HOLD Data since the August meeting have been broadly in line with the latest economic projections. In particular, GDP growth has rebounded and consumer price index (CPI) inflation was slightly higher in July. Furthermore, labour market figures suggest the economy has a very limited degree of slack, with average earnings growth noticeably higher in the three months to July. After last month’s increase in bank rate, should the economy continue to develop in line with the Inflation report projections, further increases are likely in the future to return inflation sustainably to the two per cent target.
Simon Ward, Janus Henderson Investors
HOLD GDP growth was boosted temporarily by weather effects. Money trends remain soft and the global economy is slowing. Faster pay growth is likely to squeeze profits rather than boost inflation.
Vicky Pryce, CEBR
HOLD Activity and wages picked up in the summer but manufacturing in recession, business confidence still weak and growth forecasts continue to be downgraded due to brexit uncertainty.
Kallum Pickering, Berenberg
HOLD Although recent wage and spending data has surprised to the upside, it’s sensible to wait until after the Brexit vote before hiking again.
Tej Parikh, Institute of Directors
HOLD Businesses and households will be looking for stability and support as Brexit negotiations go to the wire. Now’s not the time for boat rocking.
Jacob Nell, Morgan Stanley
HOLD While letting the impact of the August hike sink in and against the backdrop of Brexit endgame uncertainty, keep rates on hold.
Ruth Gregory, Capital Economics
HOLD While the economy regained some momentum at the start of Q3 and earnings growth gathered pace, ongoing Brexit uncertainty provides a good reason to sit tight for the moment.
Simon French, Panmure Gordon
HOLD There is considerable uncertainty whether recent economic momentum held up during August. Inflation expectations also remain well anchored around two per cent. As a result, UK monetary policy can afford to wait and see the outcome of current Brexit negotiations.
Mike Bell, JP Morgan AM
HOLD There’s no need for another rate hike so soon after the last one. It’s worth keeping an eye on wages though with unemployment at such low levels.