Cascade Commentary

Market expects Bank of England to delay interest rate hike in August 2017 meeting

The Bank of England will release the minutes from its latest meeting tomorrow on Thursday 3 August 2017, announcing therein its decision on benchmark interest rates along with a release of the latest inflation data. 

Data presented at the June meeting led three committee members (Kristin Forbes, Ian McCafferty and Michael Saunders) to vote against the proposition to leave rates unchanged, preferring instead to increase Bank Rate by 25 basis points. Since then, Kristin Forbes has been replaced by Silvana Tenreyro, an academic at the London School of Economics, and this meeting will mark her first since appointment.

Inflation undershot expectations in June falling to 2.6% in year-on-year figures released by the Office of National Statistics (ONS), down from 2.7% (as measured by CPIH) or 2.9% (as measured by CPI) in May 2017. This was driven by cheaper petrol and diesel prices along with a fall in certain recreational and cultural goods and services (including computer games, television, audio equipment and toys), despite a partial offset by rising prices in furniture and furnishings.

Tomorrow's meeting will provide insight into the committee's view on the tender balance between the upward inflationary pressures experienced since April 2016 due to a tighter labour market and falling value of sterling following the vote to leave the EU in June 2016, and the downward pressures and implications of tightening monetary policy as is presently expected over the coming two years. 

Most are expecting interest rates to be held tomorrow with some suggesting that a potential rate rise could occur in Q4 of this year. We will keep you updated as the decision is announced. Should you wish to discuss any of this further, do give us a call on 0191 4813777 and we'll be happy to assist. 

Loading content...