Preview:Â BoE hike with contingent next steps
- Economic developments have been broadly in line with the BoE’s May forecasts, and so I continue to expect a rate hike at this meeting, albeit with two dissents. Concerns about consumer deleveraging should have been dispelled.- Higher inflationary pressure from financial market prices has provided a hawkish stretch to the MPC’s revealed collective preference in the policy trade-off.
- Guidance on the MPC’s view of neutral interest rates is likely to be slightly above current market pricing, but its probable contingency on the Brexit outcome curbs the hawkish impetus, as does the lower current effective R*.
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