BoE: Pause this month unlikely to turn into a permanent hiatus - ING

According to James Smith, Developed Markets Economist at ING, the major drivers underpinning the Bank of England's recent tightening bias have remained largely on track.

Key Quotes

“The prospects for global growth still look relatively bright, despite the recent moderation in Eurozone activity. Similarly, wage growth has continued to outperform over the last few months, giving policymakers greater confidence that skill shortages in the jobs market are boosting pay. Bank agents have indicated that this could be the best year for pay settlements since the crisis.”

“Policymakers will also be acutely aware that their window to hike rates could close soon. If the build-up to the December and March EU leader's meetings is any guide, the months leading up to the October summit could see negotiations get increasingly noisy. At the same time, we expect to see core inflation fall back to target over the summer, given that prices have now virtually adjusted to the new value of the pound. This has seen inflation fall noticeably faster than the Bank of England was forecasting back in February.”

“These two factors could complicate efforts to hike rates as we get later into the year, and we think the Bank will be keen to capitalise while they can. Assuming that the faltering consumer sector doesn't deteriorate further, we think there's still a good chance the Bank will hike again in August.”