After the sea of downbeat economic news in recent weeks, the Monetary Policy Committee (MPC)’s decision to keep rates unchanged at its meeting in May came as little surprise. Of course, the MPC’s decision to hold fire largely reflected a desire to confirm that the weakness in growth in Q1 is temporary. And the picture could easily – and probably will – alter again by the time of August’s Inflation Report.
Indeed, if we are right in thinking that the recent larger-than-expected fall-back in inflation and subsequent recovery in real wages will help growth to outperform the MPC’s expectations, then the Committee should be finally in a position to begin normalising policy. As such, we are sticking with our view that the MPC will hike again in August and November, and by a further two times before the end of 2019, taking Bank Rate to 1.50% by the end of that year.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services