Looser fiscal/tighter monetary mix whoever is the Prime Minister

If members of the Monetary Policy Committee (MPC) had hoped that this week's data releases would provide a clear steer on whether to follow other major central banks and raise interest rates by at least 50bps in August, they will have been disappointed. We suspect that a 50bps rise in interest rates is a bit more likely than 25bps. Meanwhile, with the next Prime Minister likely to loosen fiscal policy in the autumn, this increases the chances that rates rise from 1.25% now to a peak of 3.00% next year.