Bank of England Puts Off Interest Rate Rise

FTSE edges up before BoE meets, RBS gains

The BoE said it expected Britain's economy would grow by 1.4 per cent this year, down from the 1.8 per cent rate it predicted in February, which was a bit above what most economists thought likely at the time.

There was speculation earlier this year that the BoE would raise rates in May, after pushing the base rate up by 0.25 per cent in November - the first interest rate rise for more than a decade.

Mark Carney said the Bank of England still intends to deliver "modest" tightening after an unexpected economic slowdown derailed an interest-rate hike that investors had anticipated as soon as this month.

A similar market measure, short sterling interest rate futures FSSZ8 priced in the lowest chance of a rate rise this year since January, after one of the biggest reductions in expectations this year. If it views the first-quarter slowdown as a blip, and still believes growth will exceed its 1.5% speed limit for the year as a whole, it could decide to move now, rather than wait and allow medium-term inflationary pressures to build. The pound, which last month hit its highest level since the country voted to leave the European Union in June 2016, at $1.40, is faltering again.

However, the Bank described that as a "temporary soft patch" with "few implications" for the outlook for the economy.

The Bank of England has announced it is keeping its main interest rate at 0.5% amid evidence that the economy is slowing.

The preliminary estimate of GDP growth in the first quarter was 0.1%, 0.3 percentage points lower than expected in February.

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'The prospect of a tight labour market, a bubbling crude and weaker sterling seems set to only stoke inflation higher in coming months, with little solace on offer from the Bank, ' he added.

For the bloc, investors are now chewing over the European Central Bank's (ECB) latest economic bulletin, although this release mostly reiterated concerns over inflation and global factors whilst remaining optimistic about growth.

For Patel, sterling at $1.35 "looks overcooked relative to the more tempered BOE policy rate expectations".

They repeated their calls for a rise to 0.75% to avoid more "abrupt" policy action further down the line.

"Given the recent weakness in consumer credit and the housing market, there was somewhat greater-than-usual uncertainty about the near-term momentum in consumer spending and the extent to which households would adjust their spending and saving to the past fall in their real incomes", the minutes said.

The inflation report also reduced inflation forecasts to 2.4% in Q2 - from 2.7% previously - and by a basis point in the following years.

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