No fireworks expected at next week’s MPC meeting

Bank of England governor Mark Carney
Bank of England governor Mark Carney
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The Bank of England is expected to keep interest rates on hold at next week’s meeting of its monetary policy committee (MPC).

Ian McCafferty was again the sole voice on the nine-member panel to call for a quarter-point increase as the MPC voted to keep rates at their record low of 0.5 per cent last month.

“An interest rate hike from 0.5 per cent to 0.75 per cent sometime in the first half of 2016 currently still looks more likely than not to us,” said Howard Archer, chief UK and European economist at IHS Global Insight, ahead of the MPC meeting on 5 November.

“We favour a move in May, and consider that the odds of a move as soon as the first quarter have receded appreciably.”

Thursday’s interest rate announcement will be accompanied by the Bank’s quarterly inflation report for November, presented by governor Mark Carney. This could see the central bank reduce its near-term forecasts for the consumer prices index, which fell into negative territory for only the second time since 1960 in September.

Archer said: “It will also highly likely lower its near-term GDP growth forecasts given that GDP has actually been reported up 2.3 per cent year-on-year in the third quarter of 2015 compared to the Bank of England’s expectation back in August of 2.7 per cent, while global growth uncertainties have increased over the past three months.”

Official figures earlier this week showed that growth in the UK economy slowed to 0.5 per cent in the third quarter, down from 0.7 per cent in the previous three-month period.