BoE on hold until May 2017 – Rabobank

Strategist at Rabobank Carlijn Prins assessed the prospects of a rate hike by the Bank of England.

Key Quotes

“Bank of England Governor Carney has stepped up his warnings about the possible impact of a Brexit on the UK economy suggesting that it “could possibly include a technical recession”.

“Although it is likely that GBP would fall hard on a vote in favour of “Leave” in the June 23 referendum raising the risk of a spike higher in inflation we would expect the MPC will look through such a build-up in prices due to its cost push nature”.

“While a Remain vote may unleash a backlog of projects in certain sectors such as commercial property, underlying weakness in area such as manufacturing and construction are likely to still be apparent”.

“This suggests that the BoE is likely to retain a steady hand on policy for some time. Assuming there is a Remain vote, we are forecasting that the BoE will hold policy steady at least until May 2017”.