PANMURE’S SIMON FRENCH’S UPDATE ON UK INTEREST RATES

Today is 10 years since the last time the BoE raised interest rates. Most should be familiar with my view that we are stuck at low rates for some considerable time as the uncertainty of A50 plays out and structural deflation across the world (oversupply, demographics, ‘contestable’ markets) remains in place. Having said all this there are three voices at the BoE (Saunders, McCafferty and Haldane) angling for higher rates. On the other side are Cunliffe, Carney and Vlieghe who all favour waiting. The balance is therefore held by Broadbent and Tenreyro who we haven’t heard much from recently. My best guess is that they are going to side with the Governor in August and we will be waiting somewhat longer for a UK rate hike. It has to be said that recent data suggests that the Doves are on the right side of the argument here as weaker economic data, a stabilising GBP, low oil prices and the Bank cracking down on lending standards all point to less need for rate increases.

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