Bank of England to keep cards close to its chest as summer hike hangs in the balance
Has the UK economy performed well enough to give the Bank of England sufficient conviction to hike rates over the summer? That’s the question investors will be trying to answer as the Bank meets today, and the answer is still very unclear.
The BoE was pretty blasé about the first quarter slowdown when it met in May, noting that it was largely weather-related. But the data since then has been pretty mixed and hasn't given a clear steer on whether the economy is fully recovering, prompting markets to temper their expectations for the August meeting.
However, with wage growth picking up, we still suspect policymakers would like to hike rates then if they can. Based purely on recent BoE commentary, we still feel an August hike is slightly more likely than not – but there’s a long way to go before the next meeting.
Forthcoming data could yet force the Bank to rethink its near-term growth outlook, so we doubt policymakers will want to pre-commit to anything at today's meeting. There are still plenty of risks, not least in the retail sector, that could yet force the Bank of England to put its tightening plans on ice for a little while longer.