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The Case for Raising Britain’s Interest Rate
McCafferty was the lone dissenter from the MPC´s decision, having voted for a 25 basis point increase in Bank Rate.
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Carney also fielded questions about his ambitions after the Bank of England, with Holmes asking him directly if he wanted to be the Prime Minister of his own native Canada.
The Bank’s official forecast is for inflation to return to 2% in two years’ time, but Haldane said this assumed that labour’s share of national income recovered to its pre-crisis trend. “In fact, it went in the other direction”. The European Central Bank is expected to cut rates in an attempt to combat low inflation rates for the euro.
Traders expect United Kingdom inflation and retail sales data due next week are unlikely to change the outlook for monetary policy.
“Against that backdrop, my view is that the case for raising interest rates is still a few way from being made”. At the end of next year, Bank Rate will be 1.0%, then rise to 1.75% by the end of 2017.
He elaborated, saying, ‘Markets think the first hike will come in the fourth quarter of 2016, but the Bank seems to be guiding towards a third quarter move’. By end-2018 it will still only be 2.0%.
Sterling rose on Wednesday, shrugging off data that showed United Kingdom wages growing at a slower than expected pace in the third quarter, with investors judging it did little to alter expectations of when the Bank of England will raise rates.
“If the option of skilling up is no longer available, this increases the risk of large scale un- or under-employment”.
If the BoE does follow closely on the heels of the Fed, the pound would likely strengthen.
And I’m sure there will be plenty of positivity tonight at the North East Business Executive of the Year awards – The Journal’s annual celebration of the individuals who make so many of our region’s businesses the success stories that they are.
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Pollsters were split as to whether a stronger pound was a worry for the British economy. Fifteen of 27 were concerned or very concerned while 12 were not concerned. None were not concerned at all. Forecasts were put back after the Bank of England’s last inflation report in which the Bank said the outlook for global growth had weakened. It also predicted that United Kingdom inflation – which last month slipped into negative territory for the second time this year at minus 0.1% – would remain below 1% until the second half of next year.