City A.M. Shadow MPC holds, despite growth

ALLISTER HEATH | CITY A.M.
“The collapse of forward guidance is just the latest evidence that a tightening of monetary policy is long overdue. Significant capacity constraints are already emerging and will worsen as the economy returns to a normal growth rate. Bank rate should immediately be raised to one per cent.”

JAMES SPROULE | INSTITUTE OF DIRECTORS
“There is a danger of ultra-low rates being incorporated into longer term assumptions, eg. housing. No rise is necessary now, but the Bank could discourage over-extension of credit.”

SIMON WARD | HENDERSON
“Raise Bank rate to one per cent. Emergency settings are not appropriate given sustained above-trend economic growth and limited spare capacity. Narrow money buoyancy and accelerating house prices confirm that policy is too loose.”

GEORGE BUCKLEY | DEUTSCHE BANK
“Hold. Growth is recovering well, but it is coming from a low base (output is still below peak) and we have expectations of lower inflation going forward. No need for an early rate rise.”

VICKY PRYCE | GOVERNMENT ADVISER
“Hold. Good data suggests upswing is solidifying and euro area activity is slowly picking up. But lending to businesses remains subdued, the impact of the floods still has to be assessed, and geopolitical tensions suggest caution.”

SAMUEL TOMBS | CAPITAL ECONOMICS
“Hold. Inflationary pressures are continuing to ease, the labour market recovery is slowing and there are still no signs that low interest rates are fuelling a credit boom.”

TREVOR WILLIAMS | LLOYDS BANK
“Recovery is continuing at a decent pace, but with low inflation and spare capacity still evident, there is no need for a policy shift. Keep rates and asset holdings the same.”

ROBERT WOOD | BERENBERG BANK
“No change. But with growth at or above trend, house prices booming, and slack falling rapidly – eg. see jobs numbers in PMI data – a rate rise will be needed within the next year.”

ROSS WALKER | RBS
“The more benign inflation outlook and more pronounced downside risks to growth – international tensions and domestic weather – bolster the case for no early rate hike.”