Bank Of England To Plow Lone Furrow With Rate Hike Message | 2/7/2019 | Staff
LONDON (Reuters) – The Bank of England looks set to plow on alone among major central banks on Thursday by sticking with its message that it plans to raise interest rates, just as trade wars and a global slowdown have forced others to turn more cautious.

The BoE is expected to repeat its intention of raising borrowing costs – Brexit permitting – in a week in which European Central Bank President Mario Draghi broached another round of stimulus and the U.S. Federal Reserve signaled it could cut interest rates later this year.

BoE - June - Policy - Decision - GMT

The BoE is due to announce its June policy decision at 1100 GMT.

Economists polled by Reuters think there will be a unanimous vote to hold rates at 0.75%, despite two officials talking recently of the need for higher borrowing costs sooner rather than later.

Britain - Isolation - Reasons - Borrowing - Costs

Looking at Britain in isolation, there are reasons why borrowing costs might need to rise before long, assuming that whoever succeeds Prime Minister Theresa May can avoid a damaging no-deal Brexit.

Wages are growing at their fastest pace in a decade and while inflation fell to the BoE’s 2% target in May, public expectations for future price rises have strengthened markedly.

Britain - Ebbs - Flows - Economy - Banks

But Britain is highly sensitive to the ebbs and flows of the global economy, meaning that if other central banks begin to cut rates again while the BoE holds firm, Britain’s monetary policy stance would become tighter in relative terms.

“If the rest of the world is going to be on an easing path and we hold tight … all else being equal it does the job on sterling,” said Simon French, chief economist at merchant bank Panmure Gordon.

Pound - % - May - Concern

The pound has fallen by 5% since early May, as concern grew...
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