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BOE leaves rates on hold, but hints at 2018 rise

Thursday, August 03, 2017 - 01:50

The Bank of England keeps interest rates at a record low again and cuts its forecasts for growth and wages as Brexit weighs on the economy. But as Ivor Bennett reports, Governor Mark Carney says it would not take much of a pick-up to justify a rate hike.

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It was never really a question of if there'd be a rate hike today More when it might happen in the future. The answer - potentially sooner and more frequent than we might think. SOUNDBITE (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "If the economy follows a path broadly consistent with the August central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than the path implied by the yield curve underlying those projections." Some had started to price in the chance of a rate hike, after last month's unexpectedly close decision by the Bank of England to keep them on hold. But this time, the 5-3 split reverted to 6-2. Governor Mark Carney linking a dip in investment to uncertainty over Brexit. SOUNDBITE (English) BANK OF ENGLAND GOVERNOR, MARK CARNEY, SAYING: "Deferral of investment is going to mean that the supply capacity of the economy expands at a slower rate. The speed limit, if you will, of the economy has slowed." Rather than 1.9 percent growth, the bank's now predicting 1.7 percent in 2017. And trimmed its forecast for 2018 too. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "I wouldn't say we're necessarily vulnerable. But I do think relatively speaking we've got some catching up to do." The announcement saw sterling fall to a nine-month low against the euro, having hit an 11-month high against the dollar only moments before. Not good news for consumers, worse still a cut in wage growth forecasts by half a percent. Longer term, the bank does see inflation coming down - to just under 2.6 percent in a year's time. But the forecasts are based on what Carney repeatedly called a smooth transition post-Brexit. And that may depend on what relationship Britain eventually transitions to.

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BOE leaves rates on hold, but hints at 2018 rise

Thursday, August 03, 2017 - 01:50