BoE could be forced into another interest rate U-turn

0
28


Is ANOTHER interest rate U-turn on cards? With inflation holding steady the BoE could be persuaded to stick to 0.5% over a raise

  • Official figures yesterday showed inflation held steady at 2.4% in June
  • That could persuade the Bank to leave rates unchanged at 0.5%
  • It has been widely predicted that rates would be raised

Hugo Duncan for the Daily Mail

Mark Carney could be forced into yet another U-turn on interest rates as prices rise at a slower rate than feared.

The governor of the Bank of England has hinted it may raise rates on August 2 – two weeks today – as it battles to bring inflation under control.

But official figures yesterday showed inflation held steady at 2.4per cent in June, confounding predictions it would rise to 2.6per cent.

Mark Carney could be forced into yet another U-turn on interest rates as prices rise at a slower rate than feared

Mark Carney could be forced into yet another U-turn on interest rates as prices rise at a slower rate than feared

That could persuade the Bank to leave rates unchanged at 0.5per cent, rather than raise them 0.75per cent as has been widely predicted. 

In the past, Carney, 53, has been likened to an unreliable boyfriend for blowing hot and cold over the outlook for interest rates.

The pound fell yesterday on the back of the inflation figures as investors bet the Bank could again delay a rate rise. 

Sterling fell 0.5per cent against the dollar in four minutes after the data was published, reaching a low of $1.3011, its weakest level for ten months.

Balraj Sroya, a trader at currency firm Foenix Partners, said: ‘The pound plunged as the likelihood of an August rate hike falters. 

‘Chances of a hike in August stood at over 80per cent earlier this week, but with inflation holding steady it could cause the unreliable boyfriend and the Bank to push back once again.’

In the past, Carney, 53, has been likened to an unreliable boyfriend for blowing hot and cold over the outlook for interest rates

In the past, Carney, 53, has been likened to an unreliable boyfriend for blowing hot and cold over the outlook for interest rates

In the past, Carney, 53, has been likened to an unreliable boyfriend for blowing hot and cold over the outlook for interest rates

The Bank had been expected to hike rates in May, having raised them from 0.25per cent to 0.5per cent in November – the first rise in borrowing costs for over a decade.

But after a weak start to the year for the economy, when the blizzards swept in by the Beast from the East disrupted business, it held rates at 0.5per cent. 

This month Carney said he had ‘greater confidence’ that the slow start to the year was due to poor weather, paving the way for a rate rise in August as the economy picks up.

But another U-turn may be on the cards, with critics saying that the Bank’s credibility is under threat.

Craig Erlam, senior market analyst at trading firm Oanda, said: ‘If it holds off again in two weeks, despite the bounce-back in the economy, people will seriously question whether any attention at all should be paid to the central bank’s guidance.’ 

Advertisement





Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here