Bank of England to keep rates steady, markets look for August hint

The Bank of England may lay some groundwork on Thursday for an August interest rate rise, if in which judges the economy is usually right now turning a corner after an unusually weak start to the year.

No economists polled by Reuters expect the BoE to raise rates when in which announces its June policy decision at 1100 GMT, as well as markets are split over whether the BoE’s next rate rise – which would likely be just its second since the financial crisis – will come at its next meeting in August, or only later in 2018.

At the end of last year Britain was the slowest-growing economy among the G7 group of rich nations, as businesses held back coming from investing ahead of Brexit as well as high inflation triggered by the 2016 referendum eroded households’ disposable income.

Inflation is usually drifting down coming from a 5-year high of 3.1 percent hit in November, as well as growth from the first three months of the year was the slowest since 2012, after snow storms worsened existing weaknesses from the globe’s fifth-largest economy.

although with unemployment at its lowest since 1975, the BoE says the economy is usually running near full capacity, as well as in which the longer-term direction for interest rates over the next two to three years is usually likely to be up.

“I’m expecting a baby step in a more hawkish direction,” said Alan Clarke, a financial markets strategist at Scotiabank. Economists had expected the BoE to raise rates in May, until a string of
weak data as well as discouraging words coming from BoE Governor Mark Carney in April quashed those expectations.

Last month the BoE said in which wanted to see signs of stronger growth before in which prepared to raise rates, in sharp contrast to the United States, where the Federal Reserve has raised rates twice This particular year as well as plans to do so twice more.

Since then, figures have been mixed. April industrial output, construction as well as trade numbers were strikingly weak, as well as inflation has fallen to a one-year low. although retail sales have picked up as well as the most recent business surveys suggest additional parts of the economy are gathering steam.

Wage growth – one of the indicators looked at most closely by the BoE as a guide to medium-term inflation pressures – has risen broadly in line with the BoE’s modest expectations.

“On balance the data has been mildly more hawk-friendly,” Clarke said.

Two BoE policymakers, Michael Saunders as well as Ian McCafferty, whose term ends in August, are widely expected by economists to continue to vote for a rate increase to 0.75 percent, as the pair have done since March.

in which said, others may be unsettled by growing trade tensions between the United States as well as Europe, which contributed to Germany’s Bundesbank sharply downgrading its 2018 growth forecast last week.

The BoE is usually unlikely to give any explicit signal on timing, as Carney as well as additional officials have said their priority is usually not to give markets month-by-month guidance on rates.

although they may be more concerned by a survey This particular week which showed most of the public no longer expect rates to rise at all This particular year.

Last month, a separate survey by the BoE showed a record proportion of the public did not know what would likely happen to rates over the next 12 months, during which Britain will leave the European Union.

Carney will also have ample chance to elaborate on the outlook for the economy as well as its readiness for Brexit later on Thursday when he gives a major speech to the London’s financial services industry, scheduled for 2015 GMT.

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