NIESR: BoE should lift rates, but prepare for a reversal – Reuters

As reported by Reuters, the  National Institute of Economic and Social Research (NIESR) is urging the Bank of England to lift rates this week, though a quick U-turn on rates can’t be ruled out in the near future.

Key quotes

“The National Institute of Economic and Social Research (NIESR) stuck to its forecast for British economic growth of 1.4 percent this year and 1.7 percent next year, though this assumes a softer Brexit than Prime Minister Theresa May is aiming for.

The BoE should raise rates on Thursday for only the second time since the global financial crisis, as even the modest economic growth ahead is likely to generate inflation, it said.  “However, we think the Bank should emphasize the uncertainty of the future path for the policy rate,” NIESR economist Amit Kara said.  

“It is entirely possible that in three months’ time, because of the Brexit negotiations, because of the trade wars or some other reason, the August rate increase could look like a mistake,” Kara added. Holding off on a rate move now was not an option as the uncertainty was unlikely to lift, Kara said.”