Money in United Kingdom
United Kingdom - Money
BoE stays put in June, although consensus within the Committee is slowly shifting towards a rate hike
At its meeting ending on 20 June, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted to leave the Bank Rate unchanged at 0.50%. However, three of the nine members present—including the Bank’s Chief Economist—voted for a rate hike. At the May meeting, the BoE had voted to stay put by a 7-2 majority. The Bank voted unanimously in June to continue its purchases of investment-grade corporate bonds of up to GBP 11 billion and to maintain the total stock of UK government bond purchases at GBP 435 billion, financed by the issuance of Central Bank reserves. However, the Bank announced that it would consider scaling back asset purchases once the Bank Rate reaches 1.50%, compared to previous guidance of 2.00%. This is unlikely to happen soon; our panelists currently see rates reaching 1.50% in 2021.
The Bank’s decision to stay put was driven by a desire to ascertain the strength of the economy before embarking on any further rate hikes, as growth in Q1 slowed to a mere 0.1% quarter-on-quarter. Growth appears to have picked up somewhat in Q2—as acknowledged by the BoE—with indicators for household spending and sentiment showing signs of a recovery. On the price side of the equation, inflation has fallen faster than expected in recent months and is now not markedly above the 2.0% target. This has reduced pressure to tighten monetary policy.
In its communiqué, the BoE again made clear that monetary policy will tighten going forward, albeit gradually and to a limited extent. Despite the fading impact of the weaker currency, domestic price pressures will likely build on faster wage growth and emerging capacity constraints, with the Bank still expecting demand in the economy to exceed supply by early 2020. With the Bank’s Chief Economist now advocating higher interest rates, and the Bank judging that economic activity has recovered in Q2, the likelihood of an August rate hike has now increased slightly.
UK Interest Rate Forecast
Last month, Met the why particular panelists expected the Bank Rate to end 2018 at 0.74% and 2019 at 1.06%. A new Consensus Forecast will be published on 26 June.
United Kingdom - Money Data
|Money (annual variation in %)||5.4||6.2||5.9||3.1||3.1|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Money Chart
Source: Bank of England (BoE).
United Kingdom Facts
|Bond Yield||1.27||-3.04 %||Jul 13|
|Exchange Rate||1.32||-0.35 %||Jul 13|
|Stock Market||7,662||-0.26 %||Jul 13|
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July 11, 2018
Industrial production fell 0.4% in May over the prior month according to the Office for National Statistics, up slightly from April’s revised 1.0% decline (previously reported: -0.8% month-on-month).
July 11, 2018
According to new monthly GDP data released by the Office for National Statistics (ONS), the economy expanded 0.3% in May over the prior month in seasonally-adjusted terms.
July 4, 2018
In June, growth in the UK services sector was the fastest since October last year, with the IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) rising to 55.1 from 54.0 in May.
June 28, 2018
According to the Nationwide Building Society (NBS), house prices in the United Kingdom rose 0.5% in June compared to the previous month in seasonally adjusted terms, contrasting May’s 0.2% decline.
United Kingdom: BoE stays put in June, although consensus within the Committee is slowly shifting towards a rate hike
June 21, 2018
At its meeting ending on 20 June, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted to leave the Bank Rate unchanged at 0.50%.