BoE: Early rate hike coming? - Westpac

Although the BoE’s MPC do not meet until early August (statement on 3rd), the public airing of divergent members’ views is raising market expectations for an early withdrawal of last August’s postBrexit-vote 25bp cut, explains Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Dissent appeared to have spread into the MPC’s core but both Carney and Haldane persistently repeat that they remain data dependent, especially around consumer activity and business intentions.”

“The service sector employs 80% of UK’s workforce. The disappointing service sector PMI highlighted future downside risks. Last Friday’s ONS service output remained soft and the fall in PMI raises the risk that weakness in this sector and any slip in consumption may override concerns over higher inflation prints.”

“GBP has been testing the upper end of an effective 1.24-1.30 range, partly due to USD weakness. A close below 1.28 could trigger a swift retest of 1.24-1.25.”