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- BoE's latest statement is slightly more dovish than might have been expected - ING
BoE's latest statement is slightly more dovish than might have been expected - ING
- James Smith, the developed markets economist at ING, notes that, while the Bank of England (BoE) unanimously opted to keep rates on hold, the latest statement is slightly more dovish than might have been expected.
- "Back in May, Governor Mark Carney warned investors that, with just one rate hike priced in over the next two years, they may be underestimating the pace of future tightening. Since then, the revaluation of global monetary policy in light of the escalation in trade tensions has seen investors lower their expectations even further. In fact, markets now think UK interest rates are more likely to fall over the next couple of years.
- We had wondered if this would lead the Bank to hint more explicitly that market rate expectations are too low. In the event, however, they chose not to and interestingly have made reference to the fact that the perceived risk of a ‘no deal’ Brexit is rising. This is perhaps a subtle nod to the fact that risks to growth could lie to the downside over the summer months if uncertainty continues to rachet up.
- We tend to agree - while the recent growth numbers are being thrown around by sharp changes in inventories, we think underlying economic momentum will remain slightly weaker in the near-term as businesses ramp up preparations for an October ‘no deal’ Brexit."
- We wouldn’t totally rule out a rate hike from the Bank of England later this year if wage growth continues to perform solidly and the immediate threat from Brexit recedes – either through another Article 50 extension or less likely, a deal being ratified by parliament ahead of the October deadline."
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