Expectations of the first rate rise have been pushed back after market turmoil in China and commodity price falls. However, Bank of England governor Mark Carney has played down the impact of both on inflation in the mid-to long-run – which the Bank targets at two per cent.
Many economists see inflation turning negative over the coming months. Annual inflation – as measured by the consumer price index – was 0.1 per cent in July, and is expected to have fallen since.
The domestic economy remains in generally fine fettle.
Simon Ward has noted that money supply growth has been much stronger than the Bank’s official measure M4ex due to money being moved into the National Savings and Investments bank after the introduction of pensioner bonds. Deposits there are not counted by the Bank.
RUTH LEA | ARBUTHNOT
Raise rates. Granted there is little price inflation, but the economy is now well into its recovery phase, growth was strong in the three months to June, the unemployment rate has fallen to 5.6 per cent and earnings growth is picking up. A “crisis” Bank rate of 0.5 per cent is now inappropriate and a move towards normalisation justified. Granted, too, there is a slowdown in China, with knock-on effects elsewhere, but this should not derail Britain’s recovery.
JAMES SPROULE INSTITUTE OF DIRECTORS
Raise. While global uncertainties are growing, good UK growth continues and gradual normalisation of monetary policy remains a priority.
GEORGE BUCKLEY DEUTSCHE BANK
Hold, due to the combination of volatile markets, concerns about emerging markets growth, weak underlying inflation and softer business surveys.
VICKY REDWOOD CAPITAL ECONOMICS
Hold. The UK’s about to return to deflation, the economic recovery is still a bit fragile and global risks have grown.
KALLUM PICKERING BERENBERG BANK
Hold. Inflation remains weak and early indications of a GDP slowdown in the second half of the year suggest downside risks to inflation.
SIMON WARD HENDERSON
Raise. Core inflation is turning up, house prices are accelerating, the “living wage” will add to pay pressures from a tight labour market.
VICKY PRYCE BIS AND CEBR ADVISER
Hold. Worries about world growth have increased led by a Chinese slowdown. UK data also point to weaknesses in manufacturing
TREVOR WILLIAMS LLOYDS BANK
Hold. Inflation is hovering around zero and is likely to drop below zero over the next few months.
ROSS WALKER RBS
Hold. Inflation is about to turn negative, underlying GDP growth has been sub-trend so far this year with surveys signalling a loss of momentum.