James Smith, developed markets economist at ING, explains that while the Bank of England unanimously opted to keep rates on hold, all things considered, the latest statement is slightly more dovish than might have been expected.
Key Quotes
“In the event, however, they chose not to and interestingly have made reference to the fact that the perceived risk of a ‘no deal’ Brexit is rising. This is perhaps a subtle nod to the fact that risks to growth could lie to the downside over the summer months if uncertainty continues to rachet up.”
“We tend to agree – while the recent growth numbers are being thrown around by sharp changes in inventories, we think underlying economic momentum will remain slightly weaker in the near-term as businesses ramp up preparations for an October ‘no deal’ Brexit.”
“We wouldn’t totally rule out a rate hike from the Bank of England later this year if wage growth continues to perform solidly and the immediate threat from Brexit recedes – either through another Article 50 extension or less likely, a deal being ratified by parliament ahead of the October deadline.”
“In reality though, we think it is unlikely the Bank will hike rates this year. Domestically, uncertainty is likely to remain elevated – particularly given that we see an increasing probability of a general election later in the year.”
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