As expected the Bank of England (BoE) maintains the repo rate unchanged at 0.5% and the asset purchases remain at £375 bn.
At the last three MPC meetings (August-October) two members, Weale and Mc Cafferty, voted for a 25 bps rate hike, but the majority voted for unchanged rate. We believe that there was no change in the votes at the November MPC meeting.
Wage growth is still weak and inflation was down to 1.2% in September, the lowest in five years. The recent sharp fall in oil prices indicates that CPI inflation might fall below 1% later this year. Furthermore, the manufacturing recovery is still sluggish and the housing market continues to gain evidence of cooling down. In total this supports our view that the BoE is not in a hurry to hike rates and we stick to our forecast on a first rate hike in Q2 2015.
The MPC minutes will be published on Wednesday 19 November. The main focus in the minutes will probably be the development of the slack in the economy, the weak wage growth and below target inflation.
Nordea