Hamilton Crawford analysts say the Bank of England will likely keep rates steady this week. Due to weaker than anticipated economic data coupled with concerned remarks from Governor Mark Carney, what seemed to be an almost certain rate increase now seems highly unlikely.
Since joining the Bank of England 5 years ago, Carney has indicated on numerous occasions that borrowing costs would be increased. However, with the outlook for the UK economy being brought into question in light of its departure from the European Union, Carney is not likely to support a rate hike at the BoE policy meeting later this week.
Hamilton Crawford analysts say the biggest hurdle facing the Bank of England will be convincing investors that an additional rate increase is credible this year in light of the overall economic slowdown.
Last week, sterling fell to its lowest level against the dollar since the first month of this year as uncertainty over whether or not the BoE would hike interest rates set in.
Hamilton Crawford analysts say the BoE will need to make a compelling argument that the economic slowdown seen in the first quarter of this year is only temporary.
Unseasonably heavy snow fall in March caused the UK economy to slow and high inflation caused by a sharp devaluation of the pound after the Brexit referendum in June 2016 caused damage to consumer spending power and deterred companies from going ahead with substantial investments.
In November last year, the BoE hiked interest rates for the first time in more than ten years and earlier this year it stated that it would likely need to increase rates more quickly than the markets had anticipated.