- Bank of England set to hike rates earlier than expected
The Bank of England (BoE) may raise interest rates earlier than expected, the governor of the bank said Thursday. Following a unanimous vote in favor of leaving the interest rate at 0.5 percent, Mark Carney said addressing a news conference: 'It will likely be necessary to raise interest rates to a limited degree gradually but somewhat earlier and to a somewhat greater extent than what we had thought in November.''
This message was clearly important for the markets and one that was well received. The Bank has also revised the U.K.’s re-growth forecast from 1.5 percent to 1.7 percent for this year.
The Monetary Policy Committee minutes released earlier on Thursday said: “Were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report, in order to return inflation sustainably to the target.”
The recent volatility in U.S markets has added more uncertainty to the U.K. economic outlook as the Brexit process is already pressuring the economy. Ben Broadbent, the deputy governor of the Bank of England speaking to BBC Radio 4 last week said: “this week's steep market falls have merely taken values back to levels of a couple of months ago.”
Noting that the current situation is much different than 2007, 'Equity markets go up and down, you have a correction of this size roughly every 18 months on average, so it's not terrifically unusual,' he said.
The U.K’s trade deficit also rose to £13.6 billion, the Office for National Statistics (ONS) said, which was higher than forecast.
'The sharp deterioration in the U.K.'s net trade position in December was disappointing and means that trade is likely to have been a drag on U.K. growth in the final quarter of the year.'
Suren Thiru, head of economics at the British Chambers of Commerce (BCC) said given the situation, it will be important to see the data of the first month of this year to be able to read the general economic outlook for the first quarter.