BoE Says Greek Crisis Could Delay Rate Hike

Bank of England policymakers are concerned that the Greek debt crisis could delay Britain’s first interest rate rise in eight years, but warned that the prospect of a hike is increasing as the UK economy strengthens.

With Brussels and Athens yet to begin formal talks on a third bailout deal, the monetary policy committee (MPC) said the eurozone could falter in the event of renewed infighting and drag down growth.

Uncertainty about the prospects for wage growth also held back the MPC from bringing forward a rates rise, according to minutes of its meeting this month. Instead, the MPC voted unanimously to maintain the base rate at 0.5%.

The minutes said: “For all MPC members, the policy decision this month was clear cut.” For a number of policymakers, however, it was the threat posed by rising wages on the Bank’s inflation target of 2% and not just the “very material factor” of Greece’s debt standoff that influenced their vote to keep rates on hold. “Absent that uncertainty, the decision between holding Bank rate at its current level versus a small increase was becoming more finely balanced,” the minutes said.

At its previous meeting, in June, the Bank said that for two policymakers, the decision rates was already finely balanced.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza