BoE to Keep Rates Steady, Thursday December 14th.
This article is originally referred from FXPrimus Special Report.
As anticipated in FXPrimus previous BoE rate decision special report, MPC members settled rates at 0.5%, an increase of 25 basis points.
It is now widely expected that BoE will not hike rates soon and markets anticipate at least two more hikes to occur gradually over the next 3 years.
With inflation way above the 2.0% target (currently at 3.0%) and higher than the long term average of 1.80% a rate may be appropriate at this time in order to curb inflation, however, the lackluster economic growth is likely to put a hold to any rate hike for now.
The chart below provides a view on the relationship between the booming change in inflation and the economic growth, which seems to move at a very slow pace.
Let’s not forget that the UK’s economic performance largely depends on any Brexit negotiation developments between Britain and the European Council.
Despite an agreement was struck last Friday (yet to be voted upon) phase two of the negotiations are likely to cause another setback.
Original Source: FXPrimus Special Report