UK rates: Weekly review

Ahead of the August Inflation Report on 6 August, the debate on the timing of rate tightening has reignited the discussion over the timing of the first rate tightening move from the MPC. This has been underpinned by a pick up in wages and a notably hawkish speech from departing MPC "dove" David Miles. Professor Miles's speech was more reflective as he is leaving the MPC next month but from a traditionally dovish member of the Committee, his speech perhaps had more "shock value", given its unexpected source, but in detail his comments were consistent with the tone of the MPC's June Minutes.

The flurry of hawkish rhetoric has driven a cheapening of GBP1y1yf and GBP 1y2yf in RV structures as expectations for the MPC have developed. The Minutes of the July meeting will be published on 22 July - the last time they will be published separately from the decision, given the new release arrangement from August. In the absence of a return to votes for tightening from established hawks and potential others, the front end may experience a consolidation or even some correction, as the Minutes may show that while the Committee is moving closer to beginning to vote for rate tightening, it is not as imminent as some have expected. In his speech, David Miles noted that in his six years on the Committee, he has yet to vote for a rate hike. 

"In our view, we expect that he will leave the Committee after August's meeting with this record intact," says Barclays.