Home owners and would be first time buyers are unlikely to see mortgage rates rise in the short term, according to experts who say the Bank of England monetary policy committee report signals unlikely change due to Brexit negotiations.
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A continuation of weaker sterling is is expected to boost consumer prices and cause inflation to overshoot the 2% target. Pay growth, although edging up, has remained persistently subdued by historical standards – strikingly so in light of the decline in the rate of unemployment to below 5%.
It said the upgraded outlook reflects the chancellor’s announcement of more spending and investment in the autumn statement, firmer momentum in global activity, supportive credit conditions and few signs of a slowdown in consumer spending.
Officials led by Gov. Mark Carney held the central bank’s benchmark interest rate steady at 0.25% at the conclusion of their February policy meeting and agreed to halt purchases of government bonds now that they have reached their GBP435 billion ($551 billion) target, the BOE said. It comes after impressive growth of 0.6 per cent in the final quarter of 2016 as GDP has remained surprisingly resilient since the Brexit vote last June. Last May, he said that a vote for Brexit would pose an “immediate and significant threat” to the United Kingdom economy, increasing unemployment, hitting growth, possibly to the point of recession. United Kingdom growth in 2016 of 2% (preliminary) showed the United Kingdom economy growing at the fastest rate of all G7 countries, while services and manufacturing figures continue to defy fears of a Brexit slowdown. The Inflation Report “certainly helps quash speculation of a near-term rate hike”.
United Kingdom factory cost inflation hit a 25-year high, data showed Wednesday, a day ahead of the Bank of England’s policy meeting and quarterly Inflation Report. Meanwhile, inflation is seen at 2.7 percent in the first quarter of 2018, slightly slower than the 2.8 percent previous projection. Also influencing our view is that we suspect that the Bank of England’s growth forecasts will turn out to be too optimistic.
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That growth forecast was well above the 1.4% GDP growth that policymakers had forecast in November and is in stark contrast to the slowdown predicted by the Bank and others in the wake of last summer’s vote to leave the EU. “Whatever happens, monetary policy will be set to return inflation sustainably to target while supporting the necessary adjustments in the economy”.
