Will BoE rise interest rates this year?

Monday, Jul 20 2015

After more than six years of highly accommodative monetary policy in Britain, this year could be the one when the BoE eventually lifts off the ground level toward more normal monetary settings. At least this is what the most recent comments by the BoE top officials suggest.

Speaking before the UK Treasury Select Committee last week, BoE Governor Mark Carney said "the point at which the interest rates may begin to rise is moving closer, given the performance of the economy, consistent growth above trend, affirmative domestic costs, kind of balanced ... by disinflation that we are are importing from abroad in part due to the strength of the currency."

Later in the week, Carney became even more explicit saying that in his view, "the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year."

BoE rate-setter David Miles offered a similar view last week when he said the BoE should begin to normalize monetary policy as early as in August this year, and then maintain a slower and more gradual path toward post-crisis monetary normalization in the UK.

"I do have one more meeting on the Committee and it will coincide with the MPC’s August Inflation Report. It also comes at a time when I think the case for beginning a gradual normalisation in the stance of monetary policy is stronger than at any time since I joined the committee over 6 years ago," Miles told the audience at the Resolution Foundation on July 14.

Sterling is currently being traded around 1.56 handle. Pair is likely to find support around 1.5550 level and resistance near 1.5660 area. There will be no major data releases in the rest of the session.

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