Bank of England Hits a 'Temporary Soft Patch'

The Bank of England's (BOE) Monetary Policy Committee (MPC) meets Thursday and is expected to keep interest rates unchanged, marking a sharp turnaround from early projections just a few weeks ago.A month ago, short-term interest rates had been pricing in another 25 basis point rate hike with near certainty (90 percent odds).

Pressure on the MPC to raise rates again after November's quarter-point increase has also eased after inflation fell back by more than expected, to a one-year low of 2.5% in March, as the impact of the Brexit-hit pound continues to fall away.

Bank of England Governor Mark Carney says the British economy is in better shape than recent growth figures suggest.

However, despite Carney's changing opinions, he's suggested numerous times that the economic data would need to back calls for a rate hike, which now, it doesn't.

"If the situation's appropriate, we will adjust policy".

He said households and businesses "expect us not to be on some preset course".

Traders said its latest update showed a disappointing guidance, while Jefferies analysts highlighted that the company missed on the opportunity of announcing a bolder mover of fiber roll out while the 13,000 job cuts were bigger then expected. Additional dissenters are unlikely to appear, after Ian McCafferty and Michael Saunders became the first to vote for a hike in March as they were in 2017.

In early afternoon London trading, the pound was 0.3 percent lower at $1.3511.




"Personally I think we might not see a rate rise for the rest of the year", Brettell said.

Short sterling interest rate futures 0#FSS: rose 3 to 4 ticks across 2018 and 2019 contracts, indicating a shallower path for future BoE interest rate rises.

The BOE governor spoke after officials kept the key interest rate at 0.5 percent, citing the first-quarter slump, and said inflation will weaken faster than previously thought. It particularly affected construction, Carney said.

The Bank is expected to cut its 2018 growth forecast in today's accompanying inflation report, down from the 1.8% predicted in its quarterly report in February, while also trimming inflation predictions.

The minutes from the meeting show the MPC wants to wait and see how the economy performs over the coming months. That matters as the Bank of England's primary mission is get inflation close to 2 percent.

The Bank's forecasts are based on financial market expectations for three rates rises by the end of 2020 to bring inflation back to the 2% target. Meanwhile, inflation is eroding wage growth, which is now below 1% despite conditions of near full employment. "The pound should recover some of its losses in the months ahead as the data confirms that the first-quarter slowdown was nothing more than a temporary glitch".

Movements in the Bank's official rates can have big effects on United Kingdom households.

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