Bank of England leaves interest rates on hold but hints rise is coming – business live

Bank of England votes 7-2 to leave rates on holdBank split over ratesThe pound has jumped, as traders anticipate a rise in May.Last night, the US Fed raised America’s interest rates 2.00pm GMT More signs of a fairly robust US economy, with the latest snapshots of the manufacturing and service sectors.The preliminary IHS Markit manufacturing PMI for March has come in at 55.7, up from 55.3 last month and the highest level since March 2015.The flash PMI surveys indicate that the economy likely continued to expand at a robust pace in March, rounding off a solid opening quarter of the year. The surveys are running at a level consistent with annualised first quarter GDP growth approaching 2.5% (though we note that official GDP estimates may once again understate growth in the opening quarter of the year).The survey’s employment index is meanwhile at its highest for nearly three years and indicative of another strong payroll rise in the order of 240,000 in March. The improved hiring trend reflects buoyant optimism regarding future growth. Companies’ expectations for output in the year ahead remained elevated, dipping slightly in services but surging to a three-year high in manufacturing. Inflationary pressures meanwhile remain a key theme of the surveys, especially in manufacturing, reflecting increased raw material prices, notably for metals. The survey found average prices charged for goods and services are rising at one of the strongest rates seen since 2014. Furthermore, with factory costs showing the largest jump for seven years amid growing shortages of key inputs, inflationary pressures appear to be on the rise. US Markit PMI Data (Mar P): – Manufacturing 55.7 versus 55.5 expected, previous 55.3 – Highest since March 2015 – Service 54.1 versus 55.8 expected, previous 55.9Full Report: https://t.co/BbVo6HFZkb 1.46pm GMT Back with UK interest rates, and there could be four over the next two years, reckons Kallum Pickering, senior UK economist at Berenberg:The Bank of England seems to be re-opening the playbook it used ahead of the November 2017 rate hike. Step one, signal to markets that a hike could come soon. Step two, let a couple of known hawks dissent in a policy vote shortly thereafter. Step three, hike rates. After signalling at the February 2018 Inflation Report that a rate hike could come soon, the minutes of the March Monetary Policy Committee meeting published today showed two members of the nine member Monetary Policy Committee – Saunders and McCafferty, both known hawks – voted in favour of raising the Bank Rate by 25bp to 0.75%. These are the same members that dissented ahead of the November hike. The March minutes strengthen the bank’s February guidance that a hike could come soon. The real question is, when will it happen?…We expect the BoE to hike its Bank Rate by 25bp four times over the next two years, with two hikes in 2018 and two in 2019. This would take the Bank Rate to 1.5% by the end of 2019. We look for the next 25bp hike in May 2018. Continue reading…
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