RBC Capital pushes back next BoE rate hike call to August 2019
RBC Capital Markets has pushed back its expectations for the next Bank of England rate hike.
The bank said in a note that it now expects the next BoE rate hike to take place in August next year, versus a previous forecast of February. In addition, it forecasts just one rate hike next year, down from a previous call for two.
Looking further ahead, RBC maintained its call for two rate increases in 2020, in the first and third quarter.
"Even if we do get some Brexit clarity before the end of January, the growth backdrop and flow of data means that the MPC are likely to wait until the second half of next year before reprising their hiking cycle," RBC said.
"From here, the near-term outlook will remain completely driven by political and Brexit headlines. However, once the Brexit deal is ratified, we still see scope of the short-end rates to price in much more in the way of BoE rate hikes than they currently are."
On Thursday, the BoE stood pat on rates as widely expected, amid growing Brexit uncertainty.
The Monetary Policy Committee voted unanimously to keep rates at 0.75%. Meanwhile, the BoE trimmed its forecast for British quarterly economic growth in the last three months of 2018 to 0.2% from 0.3%. It expects growth in the first quarter of 2019 to be around that level also.
The bank voted unanimously to maintain the stock of gilt and corporate bond purchases at £435bn and £10bn, respectively.
"Brexit uncertainties have intensified considerably since the committee’s last meeting," the meeting minutes said.
"The further intensification of Brexit uncertainties, coupled with the slowing global economy, has also weighed on the near-term outlook for UK growth."
The BoE also said UK CPI inflation is likely to drop below 2% in the coming months due to declining in oil prices.