BANK of England chief economist Andy Haldane wrongfooted financial markets by voting for an immediate quarter-point rise in base rates at this week’s Monetary Policy Committee meeting.
The Bank announced yesterday that UK base rates had been held at 0.5 per cent at its latest meeting, which ended on Wednesday. This decision was in line with expectations.
However, while MPC members Ian McCafferty and Michael Saunders had been expected to continue to vote unsuccessfully for a rise in base rates at the latest meeting, Mr Haldane’s vote surprised economists and financial markets.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said of this week’s six-three vote to hold rates: “An unexpected development saw a narrower six-three vote, from seven-two, in favour of unchanged interest rates...With interest rates down at 0.5%, the Bank of England would clearly like to gradually normalise monetary policy given that it is essentially an emergency low rate.”
However, Mr Archer declared the case for a rate hike at the MPC’s next meeting in August “is not yet done and dusted, and could yet be data dependent”.
He added: “Recent UK economic news is far from 100%-convincing on the economy’s improvement. Recent slowing earnings growth is also a significant factor, despite the MPC’s confidence that pay will gradually pick up further out. Increasing global trade tensions, as well as ongoing Brexit uncertainties, reinforce the case for Bank caution on hiking rates.”
Mr Archer said there was “likely to be only one interest-rate hike in 2018, be it in August or November”.
He added: “We expect the Bank to raise interest rates twice in 2019.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here