Bank of England to make no move on UK rates in near term

The noise surrounding the Grexit debate has impacted upon market expectations, with a sharp decline in the market probability of a rate hike on maturities up to 12 months ahead. It was no surprise that there was no move on UK rates following this month's MPC meeting . Even the relatively hawkish Martin Weale suggested that it was too early to push for a hike in July.

From a domestic perspective the case for monetary tightening is strong, as Mr Weale has pointed out, although the international dimension adds to the uncertainty. The impact of a potential Grexit on the UK is not to worry about, but although the direct links to Greece are small, UK banks still have strong links to other parts of the euro zone periphery. 

The UK will thus not be unaffected by the resulting market turmoil, which could cause the BoE to stay its hand. However, this illustrates the risks of leaving interest rates too low for too long once the economy begins to recover: The central bank has less ammunition to counter the next threat, says Commerzbank. 

Finally, this month marks the last occasion with a lag between the MPC meeting and publication of the minutes. From next month, the rate decision and minutes will be published simultaneously.