The Bank of England is unlikely to cut its key interest rate on Thursday, after reducing it to a record low last month, as recent data suggested that the economy is set to escape a recession after the initial 'Brexit' shock.
The Monetary Policy Committee is expected to hold its key bank rate at 0.25 percent and the quantitative easing at GBP 435 billion in the policy meeting on September 15.
Policymakers had lowered the key rate by a quarter-point in August, which was the first cut in more than seven years. The bank also boosted its asset purchase programme by GBP 60 billion.
Last week, BoE Chief Mark Carney was criticized by lawmakers in a hearing for being too pessimistic after the 'Brexit vote'. He was also asked to justify the loosening stance adopted in August.
"I'm absolutely serene about the comments made both by the monetary policy committee and the financial policy committee," Carney told lawmakers. He added that more action remains on the card.
Ruth Gregory, an economist at Capital Economics, said the risk of doing nothing in August was substantially greater than that of loosening monetary policy.
Economists widely expect another cut in rates to 0.10 percent in November. If the MPC were to disappoint these expectations then sterling could continue its recent rise, said Gregory.
The post-referendum weakness in sterling helped to boost exports. The falls in sterling, however, will add upward pressure on import prices.
IHS Global Insight economist Howard Archer said there is clearly an increased chance that the bank will sit tight on interest rates in November given the current resilience of the economy, especially as the MPC may well want to see what Chancellor Philip Hammond comes up with in the Autumn Statement.
The British Chambers of Commerce downgraded the U.K. growth projections on Monday, citing weaker consumer spending and a large reduction in investment. The business lobby projected growth of 1.8 percent for this year versus 2.2 percent seen earlier.
The projection for 2017 was trimmed to 1 percent from 2.3 percent. If the forecast for 2017 is realized it would be the weakest rate of growth since 2009, the BCC noted.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Business News
