Back
5 Jun 2014
BoE holds rates, FSC may mitigate future hike pressure
FXStreet (London) - The Bank of England (BoE) today held rates as expected, again not even deeming it necessary to release an accompanying policy statement. While we may see some creeping hawkishness in minutes later in the second half of the year, for now the BoE remains wed to maintaining record-low rates into 2015.
Weale - a lone hawk?
Expectations are for a unanimous vote in the June minutes, but of interest may be the departure of Spencer Dale from the monetary policy committee (MPC) and his replacement by Andy Haldane (the two are essentially doing a job swap, with Dale taking Haldane’s position as executive director for financial stability.) With Dale’s departure, Martin Weale may be left as the hawk in a flock of doves.
But even Weale has stated that and rate hike should remain some way off. Inflation remains on-target at 2 percent, after troughing to 1.8 percent last month. Wages have begun to outstrip inflation for the first time since 2007 and are expected to accelerate as slack is taken up in the labour market. Economic growth is expected to be the fastest in the developed world this year.
FSC could push for mortgage credit curbs
Pressure to hike rates could be eased further by the BoE Financial Stability Committee (FSC), set to meet on 17 June. The FSC, which shares three members with the MPC – Mark Carney, Sir Jon Cunliffe, Charlie Bean – is expected to introduce some tightening of mortgage lending conditions or advise that the Government scale back its “Help To Buy” mortgage support scheme. This move could help reduce upside price pressures in the housing market and with it pressure to hike rates to constrain prices.
Sterling to remain resilient
Despite the BoE’s reluctance to pursue an aggressive monetary tightening schedule, sterling should continue to receive strong support thanks to continuing robust macroeconomic data – holding up against both euro and dollar pairs in the absence of any coherent longer-term monetary policy guidance from the Federal Reserve or the European Central Bank (today’s ECB rate decision withstanding).
Weale - a lone hawk?
Expectations are for a unanimous vote in the June minutes, but of interest may be the departure of Spencer Dale from the monetary policy committee (MPC) and his replacement by Andy Haldane (the two are essentially doing a job swap, with Dale taking Haldane’s position as executive director for financial stability.) With Dale’s departure, Martin Weale may be left as the hawk in a flock of doves.
But even Weale has stated that and rate hike should remain some way off. Inflation remains on-target at 2 percent, after troughing to 1.8 percent last month. Wages have begun to outstrip inflation for the first time since 2007 and are expected to accelerate as slack is taken up in the labour market. Economic growth is expected to be the fastest in the developed world this year.
FSC could push for mortgage credit curbs
Pressure to hike rates could be eased further by the BoE Financial Stability Committee (FSC), set to meet on 17 June. The FSC, which shares three members with the MPC – Mark Carney, Sir Jon Cunliffe, Charlie Bean – is expected to introduce some tightening of mortgage lending conditions or advise that the Government scale back its “Help To Buy” mortgage support scheme. This move could help reduce upside price pressures in the housing market and with it pressure to hike rates to constrain prices.
Sterling to remain resilient
Despite the BoE’s reluctance to pursue an aggressive monetary tightening schedule, sterling should continue to receive strong support thanks to continuing robust macroeconomic data – holding up against both euro and dollar pairs in the absence of any coherent longer-term monetary policy guidance from the Federal Reserve or the European Central Bank (today’s ECB rate decision withstanding).