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United Kingdom – Banknote wants interest rate increase despite Brexit | News

Thursday, September 14th, 2017 | Economy

The Bank of England (BoE) left the monetary policy key on Thursday at a historically low level of 0.25 percent, signaling a willingness to increase in the coming months. From the point of view of the majority of monetary policyholders, this is likely to be the case if the price rise continues and the economy remains on a growth path. If the BoE were to make a difference with the increase, it would take the same direction as the US Federal Reserve (Fed), which has already been pursuing a tighter monetary policy course for some time.
Many experts had expected that the BoE would still be in sight for a long time in the face of the bumpy start of the Brexit talks. However, in the course of the anti-EU vote, the UK has been in a difficult position, as prices are picking up and the once booming economy is slower. "In fact, the balancing act that the BoE has been doing for some time between high inflation rates and a weakening economic momentum has not become easier," said analyst Jens Kramer from NordLB. However, economist James Knightley from Bank ING expects that an increase will not be the start of a series of interest rate hikes. "It is rather a question of revising the interest rate of the previous year, which is born out of necessity," explained Knightley.
Under tension
BoE CEO Mark Carney is putting pressure on rising banknotes as currencies are now expecting the inflation rate to exceed the three percent mark in October. The annual tax rate was 2.9 percent higher in August than it had been since May. As a result, the inflation rate is further removed from the target of BoE, which targets two percent.
The prices are driven mainly by the weaker pound, which has come under pressure after the June 2016 Brexit vote. In anticipation of an early interest rate hike, investors are catching up with the British currency. It was going to cost more than a US cent in minutes, and in the meantime cost 1.3335 dollars as much as last year.
The BoE explained that the economy is running somewhat better than expected. However, it is still unclear how consumers and companies will behave in the face of the uncertainty associated with Brexit. As wage growth does not keep pace with inflation, the public's buying mood is clouded. This proves to be a brake pad for the economy. In the vote on the benchmark interest, Ian McCafferty and Michael Saunders again voted for a quarter-percentage point increase in two members of the monetary policy committee for an immediate increase. However, they were unable to get past the seven colleagues who voted for the status quo.
On the other hand, monetary policy makers agreed to maintain the volume of their bond purchase program of £ 435 billion (just under € 483 billion). The BoE had increased the purchases in August 2016 under the influence of the Brexit shock to this level. At the same time, it lowered the key interest rate to the current level. Whether or not the central bank is going to take the role backwards, but it is not. "In our view, we are particularly concerned about the great uncertainty in the context of the conceptual approach of the British in the ongoing Brexit negotiations," the analysts of BayernLB stated.
Great Britain's exit talks with the EU have so far been very sluggish. EU chief trader Michel Barnier complained that there had been no significant progress on key issues. The controversial issues include UK financial commitments, the future rights of EU citizens in the UK and the status of the border between Northern Ireland and the Republic of Ireland.
(Reuters)

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