Expert at Markit, Chris Williamson comments on the Bank of England MPC decision
“The Bank of England last policy unchanged at its June Monetary Policy Committee meeting, as expected. Interest rates have sat at their all-time low of 0.5% for over six years and look set to remain there for some time yet. With inflation falling negative for the first time since 1960 and the PMI surveys signalling a surprise slowing in the rate of economic growth in May, the case for hiking rates has evaporated, for now at least.
“However, there are indications from the surveys that that inflation will start to revive, possibly quite markedly, later this year, and that the economy could pick up steam again now that the general election is out of the way. Wage growth, the key missing element of the argument for raising rates, has also started to show signs of reviving.
“The Bank itself sees inflation turning ‘notably’ higher later this year and has indicated that rates are likely to start rising by the middle of next year as a result. However, it would be rash to also rule out the possibility of an initial rate hike taking place by the end of this year if we see the economy start to pick up momentum again in the summer months, as it seems likely that the general election related slowdown will fade and price pressures continue to build.”
