Bank of England keeps interest rates at 0.5%

Property Owners Braced For Interest Rate Hike

An interest rate rise could make matters increasingly uncomfortable for millions of homeowners

The strategist trimmed her year-end call for the 10-year gilt - which was already the lowest among those surveyed by Bloomberg - by 30 basis points to 1 percent in a note released ahead of the decision.

Policymakers Ian McCafferty and Michael Saunders, who again voted for a rate rise, agreed the weak growth so far this year reflected "temporary or erratic factors", but said delaying a rate hike risked more abrupt tightening later on.

GDP growth was recorded as being just 0.1 per cent for the first three months of 2018, the lowest rate of growth since 2012, and well below forecasts.

If that happens, then that would be the nail in the coffin for a rate hike from the BOE.

Since then, official figures have shown that in the first quarter of 2018 United Kingdom economic growth slowed to 1.2 per cent year-on-year from 1.4 per cent, its weakest rate of expansion since the second quarter of 2012. The manufacturing production is expected to have shrunk by 0.2% this month. That wasn't a surprising decision following weaker than anticipated growth and inflation data.

Until a few weeks ago, the markets had priced in a probable rate rise at this meeting, but downbeat economic signals and a ravaged retail scene have since swayed the MPC's outlook.

- The Bank of England's monetary policy committee will nearly certainly leave all its settings, including United Kingdom interest rates, unchanged today.

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The Bank's forecasts are still based on financial market expectations for three rates rises over the next three years, with one seen later in 2018 followed by another in 2019 and one in 2020, to bring inflation back to the 2% target in two years.

"As Governor Carney stated in his remarks in an interview in April, the MPC is, "conscious that there are other meetings over the course of this year" and although the consensus view has been that a hike would come with an inflation report, this does not have to be the case".

Quite simply, GBPUSD will strengthen if his comments are sufficiently hawkish to suggest a rate rise in August is likely, while optimism about the economy in the Inflation Report would bolster those expectations.

However in order for inflation to get back to the government's target of two per cent, the MPC stuck to its previous recommendation that three interest rate hikes of 0.25 per cent each would be implemented over the next three years, though these need not be imminent.

"If the Bank of England does cut the near-term GDP growth and inflation forecasts, but leave the longer-term projections unchanged, it would point to the gradual tightening of monetary policy being delayed rather than abandoned", he said. Competition among challenger banks, in combination with higher SWAP rates, appears to be fuelling this rise.

Many experts blame uncertainty related to Britain's exit from the European Union for the slowdown.

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