BOE's Saunders Says Recent UK Slowdown Of "Questionable" Significance

Gladys Abbott
April 21, 2018

He added: "Economic activity in March, and especially retail sales, was hit by unusually heavy snow".

The pound tumbled following Carney's comments, falling from USD1.42 to USD1.40.

Interest rate rises may be gradual but they will not be glacial, Michael Saunders, a member of the Bank of England's rate-setting committee has said, hinting that homebuyers could see the base rate rise to 2% before long.

Attempts by the Pound to mount a recovery later in the afternoon also proved to be short lived following comments by Bank of England (BoE) Governor Mark Carney late in the day.

I don't want to get too focused on the precise timing'.

He noted that the central bank will have to adjust its decisions around the Brexit negotiations and eventual divorce deal to "keep the economy on a stable path".

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"Despite the recent softness of United Kingdom inflation, we expect him to reiterate his call for a near-term United Kingdom rate hike", says Nikesh Sawjani, an economist with Lloyds Bank Commercial Banking.

"I am sure there will be some differences of view but it is a view we will take in early May [at the next meeting of the Bank's Monetary Policy Committee], conscious that there are other meetings over the course of this year".

The base rate is now 0.5%, so a rise to 2% implies an extra 1.5 percentage points on your annual interest payments. "We'll sit down calmly and look at it all in the round", Carney said.

"Most recently it has been the uncertainty around Brexit that has prevented what would otherwise have been a surge in investment in this economy akin to the big pick ups in business investment we have seen in other economies".

However the US Dollar (USD) advance was also aided by better-than-expected manufacturing figures, with the Philadelphia factory index unexpectedly rising from 22.3 to 23.2 in April.

With the Bank of England's next interest-rate decision now on a knife-edge, all eyes are trained on an expected slowdown in the first quarter and what it means for policy.

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