gpolit.com
gpolit.com May 24, 2018


Interest rates on hold as Bank cuts growth outlook

12 May 2018, 08:16 | Kenneth Drake

UK momentum will bounce back, BoE's Carney says

Best bonds to invest in 2018

Although rates remain at a very affordable level, even a slight increase could have further dampened the hunger of United Kingdom home buyers, and in a misfiring market that is already struggling to whet their appetite, this may have further stunted price growth.

'Survey data suggests that some of this slowdown can be linked to weaker economic growth in continental Europe, but companies are also reporting that domestic demand among households and businesses has continued to be dampened by uncertainty about the economic outlook and higher prices'.

He said Thursday that rates would rise, albeit modestly, if the economy evolves in line with the bank's new projections. But growth was weakest in Britain, where - less than a year before it is due to leave the European Union - Brexit-related pressures have squeezed consumer spending power and hurt firms' willingness to sign off on major investments.

Sterling was down 0.4 percent at $1.3492 at 1515 GMT, up from around $1.3470 at a fresh four-month low before Carney's comments.

Indeed, during the MPC's press conference, Ben Broadbent, the Bank of England's Deputy Governor for Monetary Policy, appeared to be adamant that the underlying message to markets had not changed.

With investors hating uncertainty, a failure in this regard could give the GBP/EUR exchange rate a chance to recover, but it will be heavily dependent on what occurs in the imminent BoE rate decision.

The bank expects inflation to ease back to 2.1 percent by this time next year and get to target in two years, provided the main interest rate rises to 1.1 percent in two years and to 1.2 percent in three years.

The Bank of England (BoE) today chose to keep interest rates at 0.5% in measured response to relatively weak economic data for 1Q2018.

But late last month, data started to raise doubts. Even so, ultimately it still believes that "an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon".

The rate was further lowered by 25 basis points in the wake of the Brexit vote in the summer of 2016 and was raised back to 0.5 percent at the end of past year.

Stuart Law, chief executive of business P2P lender Assetz Capital, said he wasn't surprised by the decision.

"Today's figures support previous estimates showing the economy was very sluggish in the first quarter of 2018, with little impact overall from the bad weather".

In all, money markets have shifted since February between pricing as many as two rate hikes this year to none at all.

Tepid growth was one of the reasons why the bank opted against hiking rates at this month's meeting, as Carney had indicated just three months ago was likely.

"We expect the disappointing first quarter to be portrayed as a temporary lull by the MPC. and therefore expect the lack of a hike to be presented as an expected postponement rather than a cancellation", UBS interest rate strategist John Wraith said.



Other News

Trending Now

Festival Of Fantasy Dragon Catches Fire At Magic Kingdom
Millions from across the globe have witnessed the Magic Kingdom's Festival of Fantasy parade at Disney World in Orlando. Photos and videos taken by park visitors show the contraption's upper portion bobbing up and down, engulfed in flames.

Trump signals cooperative approach with Mueller is fading
In an op-ed published Monday, Dershowitz says he agrees with the judge's interpretation of the Mueller's team mode of operation. And three of the attorneys are registered Democrats, according to reports in The Washington Post and PolitiFact.

'Mini-Trump' candidates battle it out in Republican primaries
IN uses an open primary system, meaning that voters are not required to register with a party to vote in a party primary. Indiana Republican Party Chairman Kyle Hupfer has declared Mike Braun the victor of the GOP nomination for U.S.

Li Keqiang calls for new progress of China-Japan ties
Li said people-to-people exchanges, including tourism, should be promoted to enhance connections between the two peoples. They can work jointly in innovation and high-end manufacturing as well as in the financial industry, the premier noted.

Saints Ingram suspended first 4 games of 2018 season
Ian Rapoport of NFL.com and the NFL Network reported the suspension on Twitter and NFL.com announced it on the league's website. Ingram will be eligible to play October 8 when the Saints play host to the Washington Redskins on "Monday Night Football".

2 earthquakes felt across Southern California
Southern California was jolted early Tuesday by a light natural disaster that was felt across multiple counties, scientists said. Quakes of that size generally don't cause any serious damage and there were no immediate reports of any problems related to it.

Swansea manager Carlos Carvalhal set for final match as club face relegation
They can also hope that Manchester City beats the Saints by a large margin to decrease that goal difference. The report even stressed that Gabiadini wants to be the key player at a club next season.

Lebanon votes in shadow of Syria war, reflecting divisions
His patron, Saudi Arabia , cut Hariri adrift in November and remained disengaged in the lead-up to the vote. But many, including Machnouk, blamed the new, complex law for the tepid turnout, particularly in Beirut .

Facebook Bans Foreign Ads On Irish Abortion Referendum
In April, we hosted an information session for referendum campaign groups on Facebook's advertising and content policies. The change will mean that ads that have been paid for by organisations outside of Ireland will no longer be shown .

Nobel Peace Prize for Trump?
At the same time, trump said that the new agreement with Iran would be developed on a "solid Foundation". Presidents Theodore Roosevelt, Woodrow Wilson, Jimmy Carter and Barack Obama are all Nobel winners.