Bank of England keeps rates on hold, hints at May rise

Hiking Cycle       Investors see May as a near lock-in for BOE second hike this year looks likely              Source Bloomberg

The decision was widely expected, but with retail sales figures released this morning (22 March) being much more positive than expected, rising wages, and upgrades to GDP forecasts announced by the Office for Budget Responsibility (OBR) this month, interest rates are widely expected to rise in May.

"We still think that the MPC will hike interest rates in May", Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said following Thursday┬┤s announcement.

"Such a path would bring us closer to the neutral policy rate, which I continue to think is likely to be well below the neutral rate that prevailed in the pre-crisis decades", Vlieghe said.

But in the BoE's view, a lack of spare capacity in the economy means it would take years for inflation to return to its 2 percent target if it does not raise rates.

Only a minority expected Saunders or McCafferty to vote for a rise.

The transition deal, which is expected to be confirmed Thursday at a meeting of European Union leaders, has, according to many economists, made it even more likely that rates will be raised in May, alongside the next set of quarterly economic projections from the Bank.

"The best collective judgement of the MPC remained that, given the prospect of excess demand over the forecast period, an ongoing tightening of monetary policy over the forecast period would be appropriate", said the minutes of this month's meeting. Sterling's seven-week high against the dollar, shortly after noon on Wednesday, came as two members of the bank surprised investors by calling for a rate increase.

Early estimates among its staff suggest growth may slow to 0.3% in the first quarter from 0.4% at the end of 2017.


Burton Mills economists did not expect the BoE to follow up on its November rate hike with another in March but do anticipate that borrowing costs will be hiked from their current rate of 0.5 percent in May.

The committee meets monthly to discuss whether to cut, raise or leave interest rates unchanged, as well as other measures such as quantitative easing.

CPI inflation fell from 3.0% in January to 2.7% in February.

"The transition deal extends the period of uncertainty, but also pushes any significant economic hit into 2019 and beyond", said Professor Peter Urwin of Westminster Business School, who is one of the few Bank of England watchers who sees a chance of three rate rises this year.

There will be two factors to focus on - the BoE's minutes for its latest Monetary Policy Committee (MPC) meeting, and the press conference given by BoE Governor Mark Carney.

But the BoE is likely to point to a sharp pick-up in wage growth to a two-and-a-half year high of 2.8 percent as cementing the case for a move in May.

Sterling slipped to 1.41 USA dollars.

British inflation jumped past year and remains at an elevated level after Britain voted to leave the European Union in 2016.

Related:

  • Obesity could become chief avoidable cancer cause, United Kingdom  charity says

    Obesity could become chief avoidable cancer cause, United Kingdom charity says

    However, overall the analysis found the proportion of preventable cases of cancer had fallen - from 42.7% in 2011 to 37.7%. Being overweight or obese is another risk factor for cancer , with 6.3% of cancer cases being linked to excess weight.
    Ricciardo hits out at penalty

    Ricciardo hits out at penalty

    Stewards, who also gave the Australian two penalty points, said the breach occurred during the day's second practice session at Albert Park .
    Trump negotiating with countries over tariffs says White House

    Trump negotiating with countries over tariffs says White House

    Evangelical leader Franklin Graham said Trump was a "changed man" from the time of his alleged affair. Sanders insisted that the administration has scolded Putin at the appropriate times .
  • Demonstrators gather around the USA  to protest gun violence

    Demonstrators gather around the USA to protest gun violence

    The spending bill, which President Donald Trump signed on Friday, also includes grants to help schools prevent gun violence. The rallies come in the aftermath of the shooting at a high school in Parkland, Florida on February 14 that took 17 lives.
    Catalan leaders face 'rebellion' charge

    Catalan leaders face 'rebellion' charge

    Judge Pablo Llarena's decision to bring formal charges means the secessionist leaders face potential jail terms of 25-30 years. Catalan television aired footage of more crowds in towns in the region, including Vic and Tarragona.
    Thomas Mueller Bails World Champions Germany Out Against Spain

    Thomas Mueller Bails World Champions Germany Out Against Spain

    The quality of the game was exquisite, the only disappointing part was that there wasn't enough goals for both the teams. Right at the start of the second half, Germany winger Julian Draxler came within a whisker of putting the hosts ahead.
  • Stringent security in place for PSL final in Karachi

    Stringent security in place for PSL final in Karachi

    In a tweet, she said: "International cricket returns to Karachi that once was a terror-stricken city". The first one-day global was held between Pakistan and West Indies on November 21, 1980.
    Iowa family of four found dead in Mexican resort

    Iowa family of four found dead in Mexican resort

    Investigators say the bodies of an Iowa couple and their two children have been found in a rented condo in Mexico . On March 16, the State Department provided a traveling advising caution tourists regarding traveling to Mexico.
    Olympic medallist Usain Bolt scores goal during trial with Borussia Dortmund

    Olympic medallist Usain Bolt scores goal during trial with Borussia Dortmund

    The world record holder in the 100m and 200m sprint was seen training along with some of the biggest stars from the club. We would love to see him sign for a club just to use him on Federation Internationale de Football Association 18.
  • NaMo app data not leaked, says govt

    NaMo app data not leaked, says govt

    Thanks mainstream media, youre doing a great job of burying this critical story, as always". Watch News Nation's special coverage to know more details regarding the same.
    North, South Korea to hold talks in a week

    North, South Korea to hold talks in a week

    President Donald Trump stated that he was ready to meet Kim Jong-un till May 2018 to discuss the current situation in the region. It would be the first such summit in 10-and-a-half years and the 3rd overall.
    Fed hikes as 'dot plot' shifts upwards

    Fed hikes as 'dot plot' shifts upwards

    Unemployment is now expected to fall to 3.8 percent this year and 3.6 percent in 2019, which would be the lowest level since 1969. So far, the Fed has been moving gradually to tighten monetary policy to prevent the world's largest economy from overheating.

Comments

Latest news

Trump praises United States military sales in talks with Saudi crown prince
He's showing reporters a sign that lists Saudi purchases and another of pending sales of military equipment to the kingdom. The top-secret information included United States intelligence on Saudi royals opposing the crown prince, the report said.

CBS Reporter Addresses Her Interview With Leonard Hamilton
The Seminoles got hot with 2:07 remaining in the game and went on a 10-2 run to pull within two points of the Wolverines. Loyola-Chicago is blowing away expectations that its Elite Eight matchup with Kansas State would be a close game.

Here comes the Dropbox IPO
It also makes Dropbox's IPO the biggest for a tech company since Snapchat 's parent company Snap went public in March 2017. Dropbox provides free cloud storage, file synchronization and personal cloud feature along with client software.

Fugitive ex-Catalan leader Puigdemont arrested by German cops
He had been visiting Finland since Thursday, but slipped out of the Nordic country before Finnish police could detain him. Puigdemont had recently left Finland before authorities there could act on a European warrant against him.

Earth Hour marked by Ottawa electrical company
The utility has noticed that, from an energy perspective, participation in Earth Hour has been declining in our province. Some of the world's most iconic landmarks like the Effile Tower will switch off lights.

Iranians charged with cyber theft, sanctioned by US
It alleges that the stolen information was used by the Revolutionary Guard or sold for profit in Iran. Those hackers were also accused of working on behalf of Iran's government.

More than 3000 flights canceled as spring nor'easter slams Northeast
Up to 8 inches of snow had fallen in some Philadelphia suburbs by midafternoon, and 13 inches outside Allentown, Pennsylvania. Several schools districts across the tri-state began posting closures Tuesday afternoon ahead of the storm's arrival.

Stocks turn sharply lower, unable to shake off trade war fears
A day after the Dow Jones industrial average dropped more than 700 points, Wall Street was poised for a steadier session. Korea was exempted at least temporarily from steep US tariffs on steel and aluminum.

Black Panther Is Biggest Superhero Movie of All Time in the US
Marvel's Black Panther has become even more of a box office giant than any of the industry's wildest predictions and expectations. The Ryan Coogler-helmed superhero movie is at $590.4M worldwide and $612.1M domestic for $1,202.5M global through Wednesday.

Palestinian teen gets prison for slapping Israeli soldier
They claim she has always been exploited by her family, who they accuse of using her to try to provoke Israeli soldiers on film. Ahed's arrest made worldwide headlines and rallied global support for her freedom, causing major embarassment for Israel .

Uber Crash Highlights Growing Safety Concern: Pedestrians
The camera which is installed in the vehicle does not perform well in dark but the radar and Lidar work efficiently in the dark. The technology's backup - the human test driver who was also in the vehicle at the time of the crash - also failed to react.

China urges US away from "brink" as Trump picks trade weapons
Last year, according to government figures, the United States imported $70 billion of cellphones and related parts from China. Trump stated Thursday that he is pressuring Beijing to develop a plan to reduce the trade deficit by $100 billion.

Nicolas Sarkozy arrested in Gaddafi poll funding inquiry
He can be held for up to 48 hours and presented to the Magistrates Court for indictment straight away if police seek charges. Another Sarkozy aide and former minister, Brice Hortefeux , was also questioned in connection with the irregularities.

Car bomb near Afghan stadium kills at least 13
Helmand is part of the main bastion of the Taliban and a key drug-producing region of Afghanistan. The police spokesman had initially given a toll of two dead and 20 wounded.

Florida shooting survivors to demand gun law reforms
In arguing for his detention, Murphy said that Zachary Cruz' presence at the school set off a chain-reaction of worry and fear. His older brother is now in police custody awaiting trial for the shooting that killed 17 people on Valentine's Day (Feb. 14).

Other news