BoE Rate Hikes Less Likely at Inflation Stalls

Add weaker inflation to the reasons why Mark Carney is having a tough job convincing investors to bring forward their bets on Bank of England interest-rate increases.

A report Tuesday showed consumer prices increased 2.6 percent in July, less than the 2.7 percent rate forecast by economists. The pound fell after the report, as it did two weeks ago when the governor’s message that investors are underestimating the path of rate increases was drowned out by cuts to the BOE’s growth forecast and his economic concerns about Brexit.

The inflation data provide further evidence of the difficulty the BOE faces in preparing the ground for higher borrowing costs against the backdrop of worsening economic indicators and continued uncertainty about Britain’s exit from the European Union. Economists in a Bloomberg survey this month cut their forecasts for growth this year and next.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam