State Street Market Commentary on the Bank of England Rate Decision

In reaction to the Bank of England meeting today, Michael Metcalfe, global head of Macro Strategy at State Street Global Markets presents his views.

Metcalfe commented, “The Bank of England’s policy gears are firmly in neutral. But the successive upward revision to growth forecasts show economic activity is proving far more resilient than anticipated. Combined with the inflation trend this creates a dilemma for the Bank of England. While inflation is forecast to rise sharply later this year, online measures of inflation warn that it is already a growing concern.

The implication is that without the cushion of much slower growth, it is no longer a certainty that monetary policy will be able to remain so accommodative for the entirety of 2017. The good news is even the possibility of an interest rate hike in 2017 may lend some support to sterling, the weakness of which has been one of the main drivers of higher inflation.”