Recent developments point to interet rates remaining on hold until well into 2015 - EY ITEM Club comments
Martin Beck, senior economic advisor to the EY ITEM Club, comments on MPC’s meeting minutes:
“The MPC’s two hawks, stuck to their guns. In their view, low inflation is largely a consequence of temporary movements in the exchange rate and commodity prices. And the very low level of Bank Rate risked unbalancing the recovery.
“But, with disinflationary pressures dominating and political and economic uncertainties on the rise, the doves are likely to get more dovish. Andy Haldane, the Bank’s Chief Economist, for one, previously seen as someone on the fence on the question of increasing interest rates, moved firmly in favour of a ‘lower for longer’ stance in a speech on 17th October. Also, the latest Bank of England Agents’ summary of business conditions, released alongside October’s minutes, showed a softening in services and manufacturing activity with a particularly marked drop in goods exports.
“These developments, along with the weight of evidence indicating that CPI inflation will remain around its current low level for the rest of the year, or even fall further, point to interest rates remaining on hold until well into 2015.”