BOE Rate-Hike Forecasts Pushed Out as Uncertainty Rumbles On

(Bloomberg) -- Economists are pushing back their Bank of England predictions, meaning it’s a close call whether Governor Mark Carney will manage another interest rate hike before he leaves.

With a Brexit agreement yet to be found, a slew of weaker-than-predicted data and more dovish noises from the central bank, analysts in a Bloomberg survey now see the benchmark rate rising to 1 percent from 0.75 percent in the fourth quarter. They previously anticipated a move before the end of June.

BOE Rate-Hike Forecasts Pushed Out as Uncertainty Rumbles On

By predicting any move this year, the economists surveyed are still more optimistic than markets, who aren’t fully pricing in any increase until beyond May 2020. That’s after Carney is due to leave the central bank early that year.

In its Inflation Report last week, the BOE cut its 2019 growth projection to the weakest in a decade and predicted a dramatic investment slump. That was followed by a speech by Carney on Tuesday that warned of the “extraordinary situation” of uncertainty faced by U.K. businesses as Prime Minister Theresa May struggles to convince lawmakers to pass her Brexit deal.

The most dovish voice of all though came from policy maker Gertjan Vlieghe, who on Thursday said that even with an agreement, weakness in the British economy and abroad means that a slower pace of hikes will be needed in coming years. The Citi Economic Surprise Index, which measures whether data beat or miss analyst forecasts, has slumped to the lowest level since June.

There was some positive news on Friday, however, with retail sales growing the most in in six months in January. Helped by consumers flocking to snap up cut-price clothing, sales excluding auto fuel rose 1.2 percent.

©2019 Bloomberg L.P.