The Bank of England Chief Economist, Andy Haldane’s, surprise vote for an interest rate increase in June, alongside a hawkish set of minutes, suggests that the MPC will press ahead with a rate hike in August. Indeed, the Committee appeared unconcerned by the recent weak industrial production figures and instead put more weight on the rebound in survey measures of economic activity. As a result, the MPC remain confident that the slowdown in GDP growth in Q1 will prove a blip. Meanwhile, the three MPC members voting for an immediate hike noted that the risks to the Bank’s wage growth forecast now look skewed to the upside. Headline regular pay growth of 2.8% y/y in April is already above the 2¾% y/y increase that the Bank expects across 2018 as a whole. Overall then, so long as activity data holds up well over the next month, as we suspect that it will, the MPC looks set to press ahead and raise rates in August.
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