Deflation and overseas risks to keep rate rise at bay

Since June’s meeting of the Monetary Policy Committee (MPC) comes just three weeks after the publication of the latest Inflation Report and recent data have not challenged its view that inflation will return only slowly to target, the Committee is likely to vote unanimously to keep interest rates on hold again this month. And while a split on the Committee may re-emerge soon, we continue to think that a majority will not be mustered to raise rates until Q2 2016.