Morning Wire shadow MPC unanimously votes to hold rates amid ‘Brexit fog’
Economists have urged the Bank of England to keep interest rates on hold at least until the “Brexit fog” has cleared.
The bank's monetary policy committee (MPC) will meet on Thursday and is expected to leave rates unchanged at 0.75 per cent despite stronger-than-expected GDP growth and pay growth at its highest in almost a decade.
Morning Wire's Shadow Monetary Policy Committee unanimously voted in favour of holding rates, with many citing Brexit uncertainty as reason to keep rates unchanged.
Our panel were in agreement, 9-0, that interest rates should be held at least until details of a Brexit deal emerge or become clearer.
The European Central Bank decided to hold rates last week and the BoE is not expected to spring any surprises with Brexit looming large.
But this month's chair Ruth Gregory, from Capital Economics, said the case for raising rates had become “a little more compelling” since September's meeting.
Morgan Stanley's Jacob Nell said inflation above target – despite dropping to 2.4 per cent in September – and rising pay justified a “hawkish message” but reasoned that the MPC should wait for more Brexit clarity.
The BoE's MPC raised rates from 0.5 per cent to 0.75 per cent in August before deciding to hold when it met in September.
Guest Chair: Ruth Gregory, Capital Economics
Hold
By and large, the data has been firmer since September’s meeting, suggesting the case for raising rates is a little more compelling. Having grown by an average quarterly rate of 0.2% in the first half of the year, the economy expanded at a rate of 0.7% in the three months to August. Domestic price pressures appear to be building too, with regular pay growth at its highest in almost ten years. But until the Brexit fog clears, it is too soon to raise rates any further.
Jeavon Lolay, Lloyds Bank
Hold
Recent data have developed broadly in line with the MPC’s projections, but the UK economic outlook could be swayed significantly by upcoming events. The current stance remains appropriate for now.
Simon Ward, Janus Henderson
Hold
Hold with bias to ease. Annual growth of the official broad money measure has fallen to 2.5%, a six-year low, signalling that MPC inflation concerns are overblown and recession risk is rising.
Mike Bell, JP Morgan Asset Management
Hold
A Brexit deal may be getting closer but I’d wait till it’s approved by U.K. parliament before responding to building wage pressures with another rate rise.
Vicky Pryce CEBR
Hold
The Chancellor must be hoping that his 'giveaway' budget will improve business and consumer confidence but impact on real economy will be muted by continued Brexit uncertainty and weaker world growth."
Simon French, Panmure Gordon
Hold
UK inflation remains largely confined to imports and energy – core price pressures remain benign. As such the Bank should wait for details of the Brexit deal before making its next policy move.
Tej Parikh, Institute of Directors
Hold
Wage growth may be on the up but can it continue given weak productivity growth? Either way, with Brexit fogging up near term economic forecasts it’s best to hold steady for now.
Jacob Nell, Morgan Stanley
Hold
Inflation above target and rising pay justify a hawkish message, but with Brexit talks in the endgame the MPC should wait for more clarity before acting.
Kallum Pickering, Berenberg
Hold
Elevated inflation expectations and accelerating wage growth signal the need for a continued normalisation of monetary policy. However, better to hold for now until the Brexit outlook becomes clearer.