Best of the Week
Most Popular
1.UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - Nadeem_Walayat
2.UK General Election 2015 Seats Forecast - Who Will Win? - - Nadeem_Walayat
3.Gold Price Downtrend Looks Set to Continue - Clive_Maund
4.Commodity Prices Set To Plunge Below 2008 Lows - Austin_Galt
5.New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - GoldCore
6.Gold and Silver Stocks or General Stock Market Indices? - Rambus_Chartology
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.UK House Prices Trend 2015 and the May General Election - Nadeem_Walayat
9.12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - GoldCore
10.Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - Mike_Shedlock
Last 5 days
Gold Demand in UK, Europe and U.S. – Reuters Interview GoldCore - 2nd Mar 15
Watch the Skies... for Investor Profits - 2nd Mar 15
How Investors Can Identify the Best Small-Cap Stocks - 2nd Mar 15
Gold and Silver - What If the Precious Metal Stocks Bulls are Back - 2nd Mar 15
Students Getting a PhD in Subprime Debt - U.S. Debt Breaking Bad Part 3 - 2nd Mar 15
The Stock Market is in The Process of Major Top! - 2nd Mar 15
Stock Market Weakening Trend - 2nd Mar 15
Gold Price Glimmer of Hope - 1st Mar 15
Stock Markets Are Riding High on Thin Air - 1st Mar 15
Varoufakis vs. the Troika - Showdown in Athens - 1st Mar 15
Subprime Rising - U.S. Debt Breaking Bad Part 2 - 1st Mar 15
Gold CoT Improving, But ... - 1st Mar 15
UK General Election 2015 Seats Forecast - Who Will Win? - 28th Feb 15
UK General Election 2015 - Forecasting Seats for SNP, LIb-Dems, UKIP and Others - 28th Feb 15
Stocks Bull Market Continues - 28th Feb 15
U.S. Debt Breaking Bad - 28th Feb 15
NATO Frankenstein - When Centralization Scales Beyond Our Control - 28th Feb 15
Gold And Silver Insanity Prevails; Precious Metals Without Direction - 28th Feb 15
Fed Raising U.S. Interest Rates - Shovelin’ Schmitt Against the Tide - 28th Feb 15
Don't Let This Stock Market Myth Cost You Your Gains - 28th Feb 15
Recession is On The Way; Beat The Stock Market Crowd, Panic Now! - 28th Feb 15
Stock Market Indexes Creeping Towards the Edge - 28th Feb 15
GGD Going for Mexican Gold - 27th Feb 15
Foreign Real Estate Is the New Swiss Bank Account - 27th Feb 15
10 Reasons Washington Has War Fever - 27th Feb 15
Gold and the Euro Tragedy, Iraq 3.0, Ukraine Conflict Three Ring Circus - 27th Feb 15
Deepak Chopra - New Age Genius or Bullshit Expert? - Video - 27th Feb 15 - Videos
New Greece Drachma Revealed Amid Bank Runs - Greeks Buy Gold Sovereigns - 27th Feb 15
Will Month Long Stocks Rally Continue? - 27th Feb 15
The Only Public Hedge Fund You Should Own - 27th Feb 15
UK House Prices Trend 2015 and the May General Election - 27th Feb 15
Why America is Ungovernable - The Republicans’ Civil War - 27th Feb 15
Gold vs Gold Stocks: Bullish Anomaly Developing? - 27th Feb 15
I Heart Capitalism, Nasdaq Stocks, Then And Now - 27th Feb 15
The Fed’s History of Assassination - 27th Feb 15 i
Gold Bull Market Forecast - Money Will Rotate Into These Dead Investments - 27th Feb 15
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

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.


© 2005-2015 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

Free Report - Financial Markets 2014