BoE Preview: Rate hike postponed to August - Danske Bank

Analysts at Danske Bank change their call and no longer expect the Bank of England to increase rates at next week's meeting. They think a rate hike will be postponed to the next big meeting in August. 

Key Quotes: 

“Many UK economic indicators have surprised on the downside recently and hence we no longer expect the BoE to increase the Bank Rate at next week’s meeting. One of the reasons why we believed the BoE would move in May and not August was due to the high market pricing, but it feels like a long time ago that a May hike was a sure thing.”

“While we no longer expect the Bank of England to hike next week, we do not think this is the same thing as the hiking cycle being cancelled altogether and we think the BoE rate hike will be postponed to the next big meeting in August, which would be the only one this year.”

“In this sense, it is going to be a hawkish hold, as the bias it towards increasing the Bank Rate (remember, two voted for a hike in March). As Mark Carney & co have highlighted they are data dependent, it makes sense to wait for further data before hiking.”

“We have also changed our call for next year and now only expect one additional hike next year (down from two previously), probably in May 2019. This makes sense, as the BoE will not tighten monetary policy too much relative to the ECB, which we now expect to stay on hold until December 2019. The biggest source of uncertainty is still Brexit and how it may impact the economy.”