The end of alchemy? | A Human View

 

The Bank of England will be the first major central bank to raise interest rates, but whether it does so as soon as next month or not until early next year has divided economists polled.

Britain's central bank stunned markets – but not the majority of analysts polled in October – by maintaining the bank rate at a record low of 0.10% last week.

While the median expectation in the November 8th-12th poll was for a 15 basis point increase on December 16th, just under half of those polled, 21 of 47, predicted the bank would remain unchanged. If it acts next month, it will be the first hike in December since 1994.

"The December gathering is now obviously 'live.' The two future labour market releases will be especially essential for the MPC "at Jefferies, Marchel Alexandrovich remarked. "If both are decent, the majority of the MPC may be willing to raise the bank rate by 15 basis points in December. However, if the December report is weak, it would be clearly more wise to postpone the rate decision until February."

"It is still difficult to separate the impact of the epidemic from the impact of Brexit, which will become evident with time. However, the relative weakness in company investment and trade is most likely a result of the new trading relationship "JP Morgan's Allan monks said.

Andrew Bailey, governor of the Bank of England, stated last week that the bank would act if it saw forecasts of greater inflation pushing up wages, despite earlier stating that the bank would act to restrict inflation expectations.