020 7898 0500It wasn’t all that long ago that almost everyone thought the MPC would definitely increase interest rates when they convened in May. The economic outlook looked positive and with inflation continually outpacing wage growth, it was felt something had to be done sooner rather than later. Then came the news that UK inflation was lower than expected and Carney was in no rush to put a date on when he would vote to hike rates. Before long, the markets had done an about turn and the pound weakened against the euro and dollar.
Yesterday we finally got an end to the speculation as it was announced that the MPC had voted 7-2 in favour of keeping rates on hold. This in itself didn’t cause too much sterling weakness, but the fact that economic growth forecasts have now been cut by a whopping 0.4% in just three months has rattled the markets and the pound hit a four-month low against the dollar. It is worth noting that the pound has recovered a little overnight, but the future doesn’t look all that rosy at the moment, despite what Carney would have you believe.
We also saw the balance of trade widen to £1.9 billion which was better than the £2 billion gap the markets had expected. There are no releases today, but we can expect more reaction to the interest rate decision, as well as the economic growth forecast.
