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UK: Time for the BoE to hike – Standard Chartered

Analysts at Standard Chartered expect Bank of England (BoE) policy makers to raise interest rates at the 2 August Monetary Policy Meeting (MPC), taking Bank Rate up to 0.75% from 0.50% – only the second rate hike since the global financial crisis.

Key Quotes

“The market agrees, currently pricing in about a 90% chance of a rate hike in August.”

“The BoE’s May Inflation Report (IR) assumed that economic momentum would improve in Q2-2018 following the dip in activity in Q1-2018, and noted that if “the economy were to develop in line with the May Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target”.”

“The minutes of the June policy meeting demonstrated that the MPC viewed this recovery as broadly on track.”

“Economic data released since the June policy meeting have reinforced this view, particularly the bounce back in GDP growth and improving business survey data.”

“Retail sales, consumer price inflation and wage growth data have disappointed somewhat in recent weeks, which likely has given MPC members pause for thought, but we think evidence of a rebound in Q2-2018 is strong.”

“Brexit adds a layer of uncertainty, but for now BoE policy makers are likely to look through the noise.”

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