James Smith, Developed Markets Economist at ING, expects the Bank of England to keep its cards close to its chest as it announces its latest decision on Thursday and suggests that mixed UK economic data means the chances of a summer rate hike are still hanging in the balance.
Key Quotes
“The BoE was pretty blasé about the first quarter slowdown when it met in May.”
“Data since then has been pretty mixed and hasn’t given a clear steer on whether the economy is fully recovering, prompting markets to temper their expectations for the August meeting.”
“However, with wage growth picking up, we still suspect policymakers would like to hike rates then if they can. Based purely on recent BoE commentary, we still feel an August hike is slightly more likely than not – but there’s a long way to go before the next meeting.”
“There are still plenty of risks, not least in the retail sector, that could yet force the Bank of England to put its tightening plans on ice for a little while longer.”