FxWirePro Poll: BoE likely to keep Bank Rate steady at 0.5 pct in Q1 2018

The Bank of England (BoE) is seen holding its benchmark interest rate or the Bank Rate steady at 0.5 percent in the first quarter of this year, after having adopted a rate hike at its previous meeting in 2017, an FxWirePro poll found.

In contrast to this, economists remained divided over the path of interest rates throughout this year. In a survey of 15 economists, while 14 sees no change in Bank Rate in Q1 2018, 1 predicts a rate cut in the following quarter and 2 others foresee 25 basis points rise in the same period to 0.75 percent. In addition, 4 out of 15 predict a rate hike to 0.75 percent in Q3 this year, one sees a 25 bps rate cut and others expect no change. For the last quarter of this year, 5 participants see a rate hike of 25 bps to 0.75 percent, one expects 50 bps rise to 1.00 percent and others see no change.

Opinions for throughout the year remain split across economists since the United Kingdom is experiencing a combination of high inflation and weak economic growth. While inflation rose to 3.1 percent in November, it is forecast to remain above the 2 percent mark even by the end of the bank’s 3-year forecast horizon.

On the flipside, the country’s economic growth opportunities have been vandalized by uncertainties eating into the Brexit negotiations, although some light at the end of the tunnel has been observed with the negotiations moving on to the Phase 2.

Meanwhile, the UK’s manufacturing PMI posted a weaker than expected outturn in December, we expect today’s reading for the construction sector to be up modestly from November. If realized, this would be the first time since Q4 2016 that the index has gone up for three months a row.

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