LONDON (Reuters) – A six-month delay to Brexit gives Britain’s central bankers space to take a broader view of the economy this week, but persistent uncertainty over leaving the European Union makes them unlikely to raise interest rates any time soon.
Since the Bank of England’s rate-setters last met in March, Prime Minister Theresa May has managed to push back the Brexit deadline to Oct. 31, shifting the Brexit cliff-edge further away than at any of their meetings since September.
Risk - Brexit - Shock - Economy - Analysts
But even with the immediate risk of a no-deal Brexit shock to the economy removed, most analysts expect the BoE to hold off on raising rates until Britain is out of the EU with some form of deal.
“While we see the need to raise interest rates slowly … the Bank of England is likely to sit on its hands until more clarity on the Brexit outcome is received,” said Nomura economist George Buckley, who predicts a rate rise in November.
None - Economists - Reuters - BoE - Monetary
None of the 75 economists polled by Reuters expect the BoE’s Monetary Policy Committee to raise Bank Rate from 0.75 percent this month, and only half a dozen predict a rate rise before Brexit is due.
The median forecast is for a rate rise in the first quarter of next year — when Governor Mark Carney will hand over to a successor. A large minority do not expect rates to rise at all this year or next, echoing financial market pricing.
Risk - Investors - Noises - BoE - Thursday
So there is a risk that investors could be thrown by even mildly hawkish noises from the BoE on Thursday.
“The prospect of a hike in coming months is still dim, but less remote than market pricing,” UBS interest rate strategist John Wraith said.
SCOPE - TO - TIGHTEN
SCOPE TO TIGHTEN?
Unlike the European Central Bank, the BoE faces inflation that is soon likely to rise above target, and in contrast...
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