Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

BOE Keeps UK Interest Rates on Hold in April But likely to Rise in May

Interest-Rates / UK Interest Rates Apr 05, 2007 - 08:39 PM GMT

By: Victoria_Marklew

Interest-Rates As expected, the Bank of England's (BoE) Monetary Policy Committee (MPC) left its policy repo rate unchanged at 5.25% this morning. However, as we've noted before (see Daily Global Commentary, March 21: UK: Rate Hike Expectations Ease but Don't Rule Out Further Tightening ), the BoE concluded in its February Inflation Report that inflation would be slightly above the 2.0% target in two years' time if the repo rate stayed at 5.25%. Given the members' concerns about underlying inflation pressures and about an increase in firms' pricing power, recent data suggest the odds still favor another rate hike in May.


Despite three rate hikes since August, the housing market remains pretty robust, although BoE Governor King noted last week that there are signs the market is starting to slow. The BoE's latest report on consumer borrowing found that mortgage lending picked up again in February, rising to £10.3 billion from £9.5 billion in January, while the number of mortgage approvals for the month remained steady at 119,000. Last week the Nationwide mortgage lender said that house price inflation was starting to slow, with average prices in March up 9.3% on the year vs. 10.2% in February.

However today the largest lender, HBOS Plc, released its Halifax house price survey, showing the annual three-month rate of price increases rising to a two-year high of 11.1%. The market may be on the verge of easing, but there's still plenty of near-term life left.

Unsecured consumer credit data are unequivocal, though. Last week's BoE survey reported a lessthan- expected rise in credit, up just £919 million in the month, the smallest increase since September, and down from £1.02 billion in January and £1.5 billion a year earlier. Those rate hikes are starting to curb consumer borrowing.

And the rest of the economy? Again, the data are somewhat mixed. The CIPS/RBS service sector index, released yesterday, will be a source of ammunition to MPC hawks. The PMI nudged upward to a reading of 57.6 in March from 57.4 in February and the measure of prices charged by companies also picked up, coming in at 55.3 - up from 54.2 in February, and the highest reading since last August. The survey also noted "anecdotal evidence" that the latest round of inflation was leading to increased wage bills. On the other hand, the survey noted that employment growth eased to its lowest since August and outstanding business declined for the first time since November 2005.

Just before the MPC announcement this morning came the news that factory output fell for the second month running in February and at its sharpest rate in nearly two-and-a-half years, raising doubts about the traction of manufacturing's recent recovery. Manufacturing output fell 0.6% on the month and rose 1.2% on the year, while overall industrial production was down 0.2% from January and up just 0.3% on the year.

Earlier this week came the news that the CIPS/RBS manufacturing PMI slipped from 55.4 in February to 54.4 in March. However, the survey's new orders index, while down from the twoand- a-half year reading of 57.6 in February, remained at a relatively high level of 57.1. And, export orders rose at their fastest pace since January 2004, with the index edging up to 55.8 (55.7 in February), boosted in particular by demand from the Euro-zone. All of this suggests that the output report for March may look a little more sanguine.

All told, it is likely that the MPC remains divided over the direction of policy. Just how divided will become clear when the minutes of today's meeting are published on April 18. For now, we continue to favor a rate hike at the May 10 meeting, but much will depend on the conclusions of the BoE's May Inflation Report - not due for publication until May 16, but the MPC members will see a preliminary copy. Until then, key data to watch include March CPI on April 17; February average earnings and February-March labor market reports on April 18; and March retail sales on April 20.

By Victoria Marklew
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife