SMM News: the Bank of England is expected to be a maverick on Thursday, insisting on a planned interest rate rise. The slowdown comes at a time when the global economic slowdown is forcing other central banks to be more cautious.
The Bank of England is expected to reiterate its willingness to raise interest rates if Brexit permits. Just this week, ECB President Jean-Claude Draghi referred to a new round of stimulus measures, and the Federal Reserve (FED/ Fed) hinted that interest rates could be cut later this year.
Analysts surveyed believe the Bank of England's monetary policy committee, (MPC), will unanimously vote to keep interest rates unchanged at 0.75 per cent, although the two officials recently talked about the need to raise interest rates as soon as possible.
In the case of the UK alone, assuming that whoever succeeds Prime Minister Theresa May can avoid the harmful lack of an agreement to leave the EU, there is a real reason why interest rates may need to be raised in the near future.
Wages in the UK grew at their fastest pace in a decade; although inflation fell to the Bank of England's target of 2 per cent in May, expectations for future price increases have risen significantly.
But the UK is extremely sensitive to the ups and downs of the global economy, meaning that if other central banks start cutting interest rates again and the Bank of England sticks to its position, the UK's monetary policy position will become relatively tight.
"if the rest of the world is on the path of relaxation and we remain tight. Other things being equal, it does affect the pound, "said Simon French, chief analyst at Panmure Gordon, a commercial bank.
The pound has fallen 5 per cent since the start of May amid growing fears that Johnson, the next prime minister's favourite, will lead Britain out of the EU on October 31, regardless of whether a Brexit deal can be reached.
This week, however, the latest dovish tendencies of the ECB and the Fed brushed away some of the gloom over the pound. The pound rose for the second day in a row on Wednesday.
It's just words, it's not going to be put into action?
Mr Carney, the governor of the Bank of England, warned last month that investors had underestimated the extent by which interest rates could rise.
But financial markets are almost entirely focused on the progress of Brexit. This may also reflect Mr Carney's previous warning but did not lead to higher borrowing costs.
Money markets show that investors expect it to be almost impossible to raise interest rates until at least mid-2020.
Mr Carney will leave office in January.
Haldane (Andy Haldane), chief economist of the Bank of England, said this month that the time was approaching to raise interest rates to curb inflationary pressures. Sanders (Michael Saunders), (MPC) member of the Bank of England's monetary policy committee, said the uncertainty of Brexit was not a reason to delay tightening forever.
Their comments are not just preparing the public and businesses for higher interest rates, but may have another purpose: any idea that the Bank of England will soon follow other central banks and change their minds is in the bud.
"one explanation for the recent MPC comments is that they are motivated by the desire to undermine the need to cut interest rates," JPMorgan analyst Allan Monks said in a research note.
Monks said that while there may be dissenting views in support of raising interest rates in the minutes of this week's meeting, it would be surprising if such views were more common in MPC.
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