UK unlikely to see rate cut?

UK's domestic economy remains solid. And in contrast to other countries, past tightening in the UK labor market is feeding through to wages, the UK seemscapable of generating inflation. So there is no need for a cut. The services PMI fall is seen as an (over-) reaction to financial turbulence, and the UK is relatively well insulated from events in China.

"UK is unlikely to see rate cut. For a start the possibility jars on where the economy is headed, a take that leads us to forecast a May rate hike from the BoE. But market chatter about the possibility of cuts seems to be increasing, in part because of Haldane's latest speech", says Bank of America.

A rate cut, if one were ever enacted, would have unpredictable and probably small effects on the economy. It may not be passed through to borrowers. Its main effect may be on the exchange rate, which failed to generate much of a boost to trade when it fell sharply post-2008.

Cutting would also be unlikely, to be seen as just a minor nudge on the tiller. Markets may even worry the BoE knew more than they did if it was prepared toimplement such a change. Trying to take out some insurance with a small cut would therefore be premature, probably pointless and potentially damaging. 

"Of course, if the UK outlook deteriorated very significantly then more monetary stimulus may be needed. Though that is not something expected", added Bank of America.