ING analysts suggest that while the BoE’s guidance still notionally hints at tightening, they think this is very unlikely to materialise this year given rising Brexit noise.
Key Quotes
“The risk of a general election later this year is clearly rising, and this will only add to the uncertainty currently weighing on growth. The prospect of further declines in investment, coupled with the recent lacklustre retail spending numbers, suggest underlying quarterly growth (once volatile production/inventory numbers are stripped out) will remain capped at around 0.2/0.3% for much of the rest of the year.”
“However we think talk of a rate cut is a little premature – wage growth is at a post-crisis high, and given this is as much a structural as a cyclical phenomenon, we suspect it will continue to perform solidly for the time being. Pay growth has been a key hawkish factor in its recent decision-making, and is a key reason why we think rates are most likely to remain on hold for the rest of the year.”
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