'Mild' deflation has continued with the cost of living falling again for British households, the latest ONS figures show.
CPI came in at -0.1 per cent for October, the same as September. This was spot on expectations and is unlikely to shift the outlook for rates.
Bank of England deputy governor Ben Broadbent warned at a Reuters event this week that investors should not rely on the money market's expectations for when and how rates will rise, with the outlook drifting further out once more.
Interest rates will not move until mid-2016 and may not even rise for the whole of next year, economists have suggested following the latest Bank of England inflation report.
A big shift back in the markets outlook for rates had preceded the second Super Thursday combination of an MPC verdict, minutes and Inflation Report.
The Bank's report suggested once more that this most likely path for rates should see inflation return to target without risking the economy's recovery.
That has widely been taken as meaning that there will be no shift in Bank Rate until well into 2016 - even if the US Federal Reserve raises rates next month.
http://www.thisismoney.co.uk/money/news/article-1607881/When-UK-rates-rise.html
3 comments:
This is a very interesting time for the World market as the UK decides to hold off on an interest rate change. The United States interest rates are expected in increase in the near future. If this is the case, will the UK economy be left behind if they do not make a change as well? Foreign investors will have a higher incentive to invest into the United States economy over the UK economy. How the UK economy reacts to an increase in the United States interest rate will be very interesting to monitor.
I agree it will be interesting to see how the UK reacts to the United States increased interests rates. But the UK should focus on their investors because if investors cannot trust/rely on the UK money markets they won't want to invests at all and where does that leave the UK with much less money. They also have weak global growth and productivity, deflation and excessive debt to be concerned about. All the UK is waiting for now is the slack in the economy in order for the rates to rise. UK's future is murky but I'm sure that they will be okay in the long run.
I think this is a very strategic step for the UK. While the United States plans on raising the interest rate, potentially this December, this will cause an influx of money to come flooding into American markets and the U.S. dollar is not that of the British pound. Currently, the exchange rate is 1 U.S. dollar for .66 of a British pound. While the Bank of England does not anticipate an interest rate change in the coming months, they did not deny a possibility of an interest rate change in the coming year, 2016. That being said, I feel that those who are wanting to invest in the British market will wait it out. The amount of return the British pound can offer is ten fold compared to that of the U.S. dollar and I do not think the British market will suffer if they wait out and increase their interest rates later than the American market.
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