OUR GUEST panel of city economists has voted strongly in favour of keeping the Bank of England’s policy rate at its record low of 0.5 per cent.
The biggest concerns were low inflation – consumer price inflation fell to just two per cent in September – and further weak inflation in the coming months as oil price falls are passed on.
Other worries were weak growth in Europe and the UK recovery losing momentum.
On the other hand, rapidly declining unemployment could prompt a spike in wages which could lead to inflation.
The Bank of England’s monetary policy committee is to announce its decision later today. Last month saw another 7-2 in favour of holding rates.
CITY A.M.’S SHADOW MPC
OUR PANEL’S GUEST CHAIR FOR THIS MONTH: ALASTAIR WINTER | DANIEL STEWART & CO
Hold rates. In his Mansion House speech in June, Mark Carney seemed to be preparing the market for the first hike at this November meeting and explained why it made sense to begin a very gradual process of normalisation. He should have stuck to his guns but now various wobbles later he has pushed expectations well into next year. An increase now cannot simply be sprung on the market.
JAMES SPROULE INSTITUTE OF DIRECTORS
Raise rates. The economy is strong enough to normalise monetary policy. The dangers of longer-term, ultra-lax monetary policy are growing.
GEORGE BUCKLEY DEUTSCHE BANK
Hold rates. Concerns over Europe and weak domestic inflationary pressures suggest the Bank has time before needing to raise rates.
ROBERT WOOD BERENBERG BANK
Hold rates. Low inflation and risks to growth from abroad means there is no need to change rates now. But rapidly declining unemployment means it will not be long before a hike is needed.
SAMUEL TOMBS CAPITAL ECONOMICS
Hold rates. Recent surveys indicate the recovery has lost a little pace and measures of domestically generated inflation are still weak – there is no need to cool the economy with higher rates .
SIMON WARD HENDERSON
Raise rates. Falling commercial bank rates have effectively loosened policy further. The labour market is tight and official data is starting to confirm evidence of rising pay pressures.
VICKY PRYCE BIS AND CEBR ADVISER
Hold rates. Despite business lending beginning to expand again, export performance is weak and service growth is slowing down.
TREVOR WILLIAMS LLOYDS BANK
Hold rates. UK inflation fell to 1.2 per cent in September and further falls are likely in the next few months. Growth remains healthy, but may have peaked.
ROSS WALKER RBS
Hold rates. The case for a rate hike was gathering momentum, but has stalled as the global economic backdrop deteriorates and disinflationary pressures become more evident at home.