Bank Of England Set To Stand Pat On Rates
September 18 2019 - 4:39AM
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The Bank of England is set to hold its key interest steady on
Thursday, at the final policy session ahead of the Brexit scheduled
on October 31.
Policymakers are likely to retain the interest rate at 0.75
percent and quantitative easing at GBP 435 billion. The
announcement is due at 7.00 am ET.
According to the British Chambers of Commerce's economic
forecast, official interest rates are expected to remain at 0.75
percent throughout 2019 and 2020, before rising to 1.0 percent in
2021.
Earlier this month, Bank of England Governor Mark Carney said
sterling volatility is at emerging market levels. The pound has
decoupled from other advanced economy pairs for obvious
reasons.
At the Council on Foreign Relations in New York, Carney
cautioned that depending on the outcome of Brexit, the financial
markets will move substantially in one way or another.
He doesn't see negative interest rates as a tool in the UK.
Carney's term as BoE chief is set to end in January.
In August, the bank had downgraded its growth outlook for 2019
and 2020 to 1.3 percent. Early this week, the BCC lowered its
growth forecast for 2019 to 1.2 percent from 1.3 percent and the
2020 outlook to 0.8 percent from 1 percent.
Official data released on Wednesday showed that inflation eased
to a 32-month low of 1.7 percent in August as computer games and
clothing turned cheaper.
The central bank had projected inflation to fall temporarily
below the target over the next six months as energy prices
decline.
James Smith, an ING economist, said higher wage costs could
feasibly translate into a bit of upward pressure for consumer
prices in the medium- term.
This is the main reason why the Bank of England will likely
retain its notional tightening bias at Thursday's meeting, and this
also suggest it's too early to pencil in rate cuts in the UK, the
economist added.
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