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Brexit delay leaves little scope for Bank of England rate rise

A six-month delay to Brexit gives Britain’s central bankers space to take a broader view of the economy this week, but persistent uncertainty over leaving the European Union makes them unlikely to raise interest rates any time soon.

Since the Bank of England’s rate-setters last met in March, Prime Minister Theresa May has managed to push back the Brexit deadline to Oct. 31, shifting the Brexit cliff-edge further away than at any of their meetings since September.

But even with the immediate risk of a no-deal Brexit shock to the economy removed, most analysts expect the BoE to hold off on raising rates until Britain is out of the EU with some form of deal.

“While we see the need to raise interest rates slowly … the Bank of England is likely to sit on its hands until more clarity on the Brexit outcome is received,” said Nomura economist George Buckley, who predicts a rate rise in November.

None of the 75 economists polled by Reuters expect the BoE’s Monetary Policy Committee to raise Bank Rate from 0.75 percent this month, and only half a dozen predict a rate rise before Brexit is due.

The median forecast is for a rate rise in the first quarter of next year — when Governor Mark Carney will hand over to a successor. A large minority do not expect rates to rise at all this year or next, echoing financial market pricing.

So there is a risk that investors could be thrown by even mildly hawkish noises from the BoE on Thursday.

“The prospect of a hike in coming months is still dim, but less remote than market pricing,” UBS interest rate strategist John Wraith said.

SCOPE TO TIGHTEN?

Unlike the European Central Bank, the BoE faces inflation that is soon likely to rise above target, and in contrast to the U.S. Federal Reserve it has only raised rates twice in the current economic cycle, most recently in August 2018.

Wage growth, retail sales, job creation and overall economic growth have been slightly stronger than the BoE’s expectations in early 2019, even if businesses and consumers are downbeat.

“The bar in the macroeconomic data for another rate hike is low … but the BoE would need to find a window in a busy political calendar to deliver a hike this year,” J.P. Morgan economist Allan Monks said.

As well as no end to the Brexit impasse, risks that could delay a rate rise include a serious challenge to May’s leadership from within her Conservative Party, a fresh national election or a second referendum on leaving the EU, Barr said.

The economic outlook is uncertain too. Some of the growth in early 2019 came from businesses stockpiling to protect themselves against a no-deal Brexit.

Carney did not sound in a rush to raise rates when he spoke in Washington earlier this month, hours after the Brexit delay.

But he highlighted how Brexit uncertainty had hammered business investment in Britain, which fell in every quarter last year for the first time since the financial crisis.

“This is starting to feed through to productivity statistics, and will have broader consequences,” he warned.

Weak productivity growth limits rises in living standards over the long term and can push up prices.

Inflation has been below the BoE’s 2 percent target for the past three months, but is likely to rise above target soon due to higher household energy bills.

The BoE is likely to increase slightly its growth and inflation forecasts on Thursday, giving scope for a more hawkish tone from Carney and other MPC members.

“There is at present less than a 30 percent probability of a 25 basis point rate hike priced in by the end of 2019, and we think the MPC will view this as too complacent,” UBS’s Wraith said.

Reporting by David Milliken; Editing by Catherine Evans

Source: UK Reuters

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Bank of England set to freeze interest rates amid Brexit ‘fog’

BANK of England policymakers are set to hold rates firmly at 0.75% next week as the “fog” of Brexit continues after the six-month EU departure delay.

The bank’s latest rates decision – which will be accompanied by its quarterly Inflation Report forecasts – comes amid signs that Brexit stockpiling has boosted recent economic growth figures.

Data suggests the economy may have expanded by 0.4% in the first quarter, up from 0.2% in the final three months of 2018.

But this was largely due to “no deal” precautionary stockbuilding ahead of the original March 29 Brexit deadline and relatively mild weather, which experts believe will unwind in the April to June quarter.

Until the “fog” of Brexit – as Bank governor Mark Carney put it earlier this year – is lifted, policymakers are seen as remaining in wait-and-see mode for some time yet.

Investec economist Philip Shaw said: “The committee as a whole is likely to remain fretful over downside risks to the economic outlook.”

He added: “The committee’s immediate concerns over a disorderly Brexit could be eased somewhat by the new 31 October exit date.

“However its worries over the global economic background seem set to remain.

“Indeed it is probably this latter point which is likely to provide the main argument for keeping rates steady this time.”

But economists are increasingly expecting pressure building for the MPC to consider raising rates later in 2019.

Investec believes one member – Michael Saunders – may vote for a hike on Thursday.

The bank is expected to nudge its 2019 growth forecasts higher in the accompanying inflation report, up from the 1.2% predicted in February thanks to the stockpile-boosted first quarter.

It may also up its inflation outlook due to energy prices, despite the Consumer Prices Index remaining steady at 1.9% in March.

“The MPC will find a case for higher rates increasingly compelling as the year draws on,” said Shaw.

He is pencilling in a hike to 1% in November, although this is based on a Brexit deal being reached.

The bank’s rates announcement also comes after the Treasury announced it had kicked off the hunt to find a replacement for Carney.

Source: The National

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Brexit deal remains most likely outcome, says the Bank of England

The Bank of England predicted today that a deal remains the most likely Brexit outcome, despite ongoing uncertainty around UK and EU negotiations.

“I still think it’s the most likely outcome, but obviously over time, every day there are headlines – positive, negative – which will send the currency in particular one direction or the other,” deputy governor Ben Broadbent told CNBC.

“But for our part we have to make a particular assumption on which to condition our forecasts, that seems to me still to be the most likely outcome and that’s the one we choose.”

His comments come after former education minister Justine Greening said this morning that parliament would reject Theresa May’s Chequers deal.

Meanwhile, the Prime Minister suffered a setback after the EU reportedly rejected her proposal that the UK can decide to quit a so-called backstop agreement on the Irish border that would put the whole of the UK into a temporary customs union with the EU.

Sterling fell one per cent amid ongoing uncertainty.

In the event of a positive Brexit deal, Broadbent predicted businesses would begin to invest more after relatively weak spending since the referendum.

“If we get a good deal, a good transition, I think we can expect to see investment spending pick up, domestic demand growth pick up,” he said. “On the other hand, sterling presumably would also be stronger, and those act in different directions on inflation.”

However, the Bank predicts that the UK economy’s growth will slow in the fourth quarter, though there are signs that pay pressure is gradually building.

“The signs are we’ll have somewhat weaker growth in the fourth quarter,” Broadbent said.

But the BoE said pay pressure has been increasing, according to business surveys the Bank has conducted as well as official figures.

Wage growth hit its fastest rate since before the financial crisis in the three months to the end of August, the Office for National Statistics revealed last month, after a 40-year unemployment low helped push wages up.

“In terms of inflationary pressure we are seeing some signs of that domestically now,” Broadbent said.

The Bank monetary policy committee decided to hold interest rates at 0.75 per cent at the start of the month, in light of Brexit uncertainty, and Broadbent attempted to reassure businesses and households that rates were not going to rise quickly.

While the Bank has predicted “limited and gradual” interest rate increases, Broadbent said this wouldn’t necessarily come in the form of one rate hike a year.

A smooth transition to life outside the EU may mean that the Bank tightens monetary policy over the next three years to cut inflation to a two per cent target.

“We will do whatever we think we have to do to meet the remit,” Broadbent said. “The point of that box was to say that unfortunately either having a deal or not having a deal is not definitive in terms of the behaviour of interest rates.”

Source: City A.M.

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Bank of England hikes rates for the 2nd time since the financial crisis

  • The Bank of England increased interest rates for just the second time since the financial crisis on Thursday.
  • Britain’s central bank raised its benchmark interest rate to 0.75% from 0.5%.
  • Members of the rate-setting Monetary Policy Committee voted unanimously to raise rates.

The Bank of England raised interest rates for just the second time since the financial crisis on Thursday, in a move widely expected by commentators and market participants alike.

Britain’s central bank raised its base rate of interest from 0.5% to 0.75%, its second hike in less than a year as it continues the process of slowly normalizing monetary policy following more than a decade of unprecedented stimulus. The bank’s key rate now stands at its highest level since March 2009.

The nine members of the rate-setting Monetary Policy Committee voted unanimously to raise rates.

“Today, employment is at a record high, there is very limited spare capacity, real wages are picking up and external price pressures are declining,” the Bank of England’s Governor, Mark Carney, said at a press conference after the announcement.

“With domestically generated inflation building and the prospect of excess demand emerging, a modest tightening of monetary policy is now appropriate to return inflation to the 2% target and keep it there.”

Prior to the announcement, markets were pricing in a more than 90% chance of a hike, with Carney and the other eight members of the MPC signaling for several months that a hike was likely to come at its August meeting.

The pound jumped on the announcement, before falling sharply after Governor Mark Carney began to speak to reporters. By 12.55 p.m. BST (7.55 a.m. ET) it was close to 0.7% lower against the dollar.

Within the announcement, the Bank of England made clear that it stands ready to continue the normalization of monetary policy.

“The Committee judged that, were the economy to continue to develop broadly in line with its Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2% target at a conventional horizon,” the BOE said.

Reaction to the hike was mixed, with some analysts questioning the expediency of the bank raising rates less than a year before the potential hit to the economy that Brexit may bring.

“At first glance, raising rates now looks something of a strange decision,” Ben Brettell, senior economist at FTSE 100 investment manager Hargreaves Lansdown said in an email.

“Inflation is above the 2% target, but not disastrously so. And a large chunk of the inflation we’re seeing is down to higher oil prices – something beyond the Bank of England’s control. Wage growth is relatively subdued, and the economy isn’t exactly overheating at the moment,” he added.

Source: Business Insider UK

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Rising UK borrowing sets stage for Bank of England rate hike

Britain’s housing market is perking up and consumer confidence has neared a two-year high, according to figures on Monday that probably keep the Bank of England on track to raise interest rates this week.

The data from the BoE and European Commission are likely to bolster the central bank’s view that Britain’s economy, while growing only slowly, has recovered from an early 2018 slowdown caused by an unusually cold winter.

Britain has lagged behind most other rich economies since the 2016 vote to leave the European Union. But the BoE has said it needs to raise rates because even Britain’s slow growth is likely to generate too much inflation.

The BoE said British lenders approved 65,619 mortgages in June, a five-month high and up from 64,684 in May. A Reuters poll of economists had pointed to a reading of 65,500. There was also a bigger-than-expected increase in lending to consumers.

Separately, a European Commission survey on Monday indicated that British consumer confidence rose to its highest level since September 2016, shortly after the Brexit referendum.

“The further pick-up in households’ and corporates’ borrowing in June strengthens the case for the (BoE) to raise interest rates at its meeting on Thursday, though we doubt that the recovery has further to run,” Samuel Tombs, an economist at consultancy Pantheon Macroeconomics, said.

Previously published surveys have shown a downbeat outlook for the housing market and subdued lending plans from major British banks, he said.

Most economists polled by Reuters think the BoE will raise rates to a new post-financial crisis high of 0.75 percent on Thursday. [BOE/INT]

However, some economists are concerned that domestically generated inflation pressure – mostly from wage growth – is actually weakening, which would make a rate hike unnecessary and even damaging to households.

“Mindful of the global and domestic macro and political backdrop – namely ongoing UK government instability – I continue to believe that a prospective rate hike is an unnecessary risk,” Sajiv Vaid, a portfolio manager with Fidelity, said.

Monday’s BoE figures showed net mortgage lending rose by 3.851 billion pounds, while consumer lending increased by 1.567 billion pounds compared with a forecast rise of 1.3 billion pounds.

Consumer credit growth has been slowing gradually since it peaked at nearly 11 percent in January 2016.

The BoE has played down any suggestion of a debt bubble, though it has acknowledged pockets of risk and required banks to set aside more money against the risk of bad loans.

Source: UK Reuters

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Bank vote could see interest rates hit their highest level since 2009

THE Bank of England will decide whether to hike interest rates to their highest level for more than nine years next week as economists predict a “close call” decision.

In what would mark another milestone for the economy in its recovery since the financial crisis, members of nine-strong Monetary Policy Committee (MPC) are expected to increase rates from 0.5 per cent to 0.75 per cent on Thursday.

The move would see rates hit their highest level since March 2009, when they were slashed from 1 per cent to 0.5 per cent as the financial meltdown and recession wrought havoc.

Investec economist George Brown said he is “fairly confident” the Bank will move to raise rates and is pencilling in an 8-1 vote in favour, with Sir Jon Cunliffe the only dissenter.

He believes the economy has performed in line with the Bank’s last forecasts in May, when it backed off from a widely anticipated hike and said it wanted to wait and see how the economy recovered after a weather-hit start to the year.

The bank also edged a step closer to pressing the button in June when its chief economist Andy Haldane joined two fellow policymakers in calling for a rise.

Howard Young at the EY Item Club believes the vote may be less definitive, given that inflation figures recently came in lower than expected – unchanged at 2.4 per cent in June, while wage growth has also been weak.

He said: “It has recently become a closer call, but we believe that the odds still favour the Bank of England lifting interest rate from 0.50 per cent to 0.75 per cent on Thursday after the August MPC meeting – most likely following a split vote.”

He added: “With interest rates down at 0.50 per cent, the Bank of England would clearly likely to gradually normalise monetary policy given that it is essentially an emergency low rate.

“Furthermore, inflation remains above target and the labour market looks relatively tight with the MPC considering that there is little slack left in the economy.”

The decision to raise rates would come as a blow to some borrowers on variable rate mortgages, but would offer relief to savers who have seen paltry returns on deposits since rates have languished at 0.5 per cent or below since 2009.

It is thought the bank’s latest set of forecasts in the accompanying inflation report will reinforce the case for a rise, with many economists expecting growth to have recovered to 0.4 per cent in the second quarter after slowing to 0.2 per cent in the previous three months.

The bank had already predicted in May that this would be the case and its latest set of forecasts are set to confirm its outlook for the year ahead.

But the bank is likely to increase its inflation forecasts, with a weaker pound and higher oil and energy prices pushing up the outlook and further justifying the need for a rise.

A rate rise in August would be the second hike in the past year, after the Bank voted for an increase from 0.25 per cent to 0.5 per cent in November – the first such move for more than 10 years and reversing the cut made in the aftermath of the Brexit vote.

Mr Brown believes this will be the only increase in 2018, however, predicting a quarter point rise every six months until they reach 1.5 per cent in 2020.

“We think the bank wants to raise rates in a gradual way and that would be consistent with the next one in February,” he said.

Source: Irish News

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Bank of England expected to hike interest rates next week

The Bank of England will decide whether to hike interest rates to their highest level for more than nine years next week as economists predict a “close call” decision.

In what would mark another milestone for the economy in its recovery since the financial crisis, members of the nine-strong Monetary Policy Committee (MPC) are expected to increase rates from 0.5 per cent to 0.75 per cent on Thursday.

The move would see rates hit their highest level since March 2009, when they were slashed from 1 per cent to 0.5 per cent as the financial meltdown and recession wrought havoc.

Investec economist George Brown said he was “fairly confident” the bank would move to raise rates and is pencilling in an 8-1 vote in favour, with Sir Jon Cunliffe the only dissenter.

He believes the economy has performed in line with the bank’s last forecasts in May when it backed off from a widely anticipated hike and said it wanted to wait and see how the economy recovered after a weather-hit start to the year.

The bank also edged a step closer to pressing the button in June when its chief economist Andy Haldane joined two fellow policymakers in calling for a rise.

Howard Young at the EY Item Club believes the vote may be less definitive, given that inflation figures recently came in lower than expected – unchanged at 2.4 per cent in June, while wage growth has also been weak.

He said: “It has recently become a closer call, but we believe that the odds still favour the Bank of England lifting interest rate from 0.50 per cent to 0.75 per cent on Thursday after the August MPC meeting, most likely following a split vote.” He added: “With interest rates down at 0.50 per cent, the Bank of England would clearly likely to gradually normalise monetary policy given that it is essentially an emergency low rate.

“Furthermore, inflation remains above target and the labour market looks relatively tight with the MPC considering that there is little slack left in the economy.”

The decision to raise rates would come as a blow to some borrowers on variable rate mortgages, but would offer relief to savers who have seen paltry returns on deposits since rates have languished at 0.5% or below since 2009.

It is thought the bank’s latest set of forecasts in the accompanying inflation report will reinforce the case for a rise. Many economists are expecting growth to have recovered to 0.4 per cent in the second quarter after slowing to 0.2 per cent in the previous three months.

The bank had already predicted in May this would be the case and its latest set of forecasts are set to confirm its outlook for the year ahead.

But the bank is likely to increase its inflation forecasts, with a weaker pound and higher oil and energy prices pushing up the outlook and further justifying the need for a rise. A rate rise in August would be the second hike in the past year after the bank voted for an increase from 0.25 per cent to 0.5 per cent in November – the first such move for more than ten years and reversing the cut made in the aftermath of the Brexit vote.

Mr Brown believes this will be the only increase in 2018, however, predicting a quarter point rise every six months until they reach 1.5 per cent in 2020.

“We think the bank wants to raise rates in a gradual way and that would be consistent with the next one in February,” he said.

Source: Scotsman

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Bank of England poised to push rates above crisis lows

The Bank of England looks set to pass a post-financial crisis milestone next week by finally raising interest rates above their emergency levels set more than nine years ago.

But with a potentially messy Brexit nearing, Governor Mark Carney may sound cautious about the pace of further moves away from the BoE’s still-powerful stimulus programme.

In March 2009, when the financial crisis was raging, the BoE slashed its benchmark rate to 0.5 percent to stave off the risk of a depression.

Bank Rate has sat there since, apart from a 15-month period after the shock referendum vote in 2016 for Britain to leave the European Union, when it was cut again to 0.25 percent – the lowest in the three-century history of the central bank.

Now, Carney and his colleagues are expected to nudge rates up to 0.75 percent on Aug. 2, going beyond last November’s increase back up to 0.5 percent.

However, taking rates above their crisis levels will not be a vote of confidence in the world’s fifth-biggest economy.

Britain has gone from having the strongest growth of the Group of Seven rich nations to being one of the slowest after the Brexit decision.

The terms of Britain’s future relationship with the EU are still unclear, eight months before Brexit, and Prime Minister Theresa May could yet be unseated by her own Conservative Party which is split on how close the country should remain to the bloc.

At the same time, consumers are still feeling a squeeze on their spending power. And inflation, while above the BoE’s 2 percent target at 2.4 percent, has been weaker than expected.

Nonetheless, the BoE says the economy cannot grow even at its current sluggish rate without causing too much inflation, given Britain’s chronically weak productivity growth.

A BoE decision to raise borrowing costs could also be backed up by a new estimate of what it considers the neutral interest rate for Britain’s economy, which neither stimulates nor suppresses demand and which is likely to be rising in the coming years as the effects of the financial crisis fade.

U-TURN AHEAD?

BoE officials have tried to soothe concerns about raising rates, something they promise will be gradual and limited.

“Voting for a 25 basis-point rate rise, a full decade after monetary policy was first placed on an emergency setting, is hardly either surprising or radical,” Chief Economist Andy Haldane said in late June.

But some analysts believe raising borrowing costs is an unnecessary risk that the central bank is taking because it failed to deliver on previous signals that a hike was coming.

John Wraith, a strategist at UBS, said domestic inflation pressure — chiefly from wage growth — was very benign while tighter monetary conditions risked triggering a squeeze on indebted consumers and cooling domestic demand.

“If and when that happens, the interest rate market may start to anticipate a reversion by the (BoE) to a neutral policy stance, especially if there are ongoing headwinds and downside risks to the outlook emanating from the UK’s protracted exit from the EU,” he said in a note to clients, adding that investors might even start to bet on a rate cut ahead.

Yet the chance of an increase on Thursday is rated at 80 percent by financial markets, and eight of the BoE’s nine monetary policymakers are likely to back a rise, analysts say.

Investors will be listening closely for whatever signals Carney gives about the outlook for further increases.

Markets are not pricing in an increase in borrowing costs to 1 percent for at least another year.

In the past, Carney has warned investors they are being too relaxed about the prospect of further hikes.

Victoria Clarke, an economist with Investec, said the BoE might want to send another reminder to the market to remain on guard, as long as Britain manages to secure a deal with the EU and avoid a damaging “cliff-edge” Brexit.

“We don’t know what politics will bring but I think Carney would want to push those expectations up a bit,” Clarke said.

Source: UK Reuters

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Tame UK inflation knocks BoE rate hike expectations

British inflation unexpectedly held steady last month, denting market confidence about a Bank of England interest rate hike next month and sending sterling to a 10-month low against the dollar.

The pound tumbled towards $1.30 and 10-year British government bond yields GB10YT=RR fell to their lowest since the end of May following the data, which also showed weakening in an underlying measure of inflation.

Despite motor fuel prices rising to their highest since 2014, annual consumer price inflation held in June at 2.4 percent, the Office for National Statistics (ONS) said.

Economists polled by Reuters had on average expected to see the first increase this year, to 2.6 percent.

Britain’s economy appears to be picking up after a slow first three months of the year, when unusually heavy snow hurt demand.

While the central bank worries that growth is close to the modest pace at which it will start to push up inflation, Wednesday’s data brought little sign of this.

Core inflation, which strips out energy, food, alcohol and tobacco prices, fell to 1.9 percent from 2.1 percent in May — below all forecasts and the weakest reading since March 2017.

“The large downside surprise adds more uncertainty around what had until now appeared a near-certain August rate hike,” JPMorgan economist Allan Monks said.

Comments from BoE officials over the next week could be a “game changer”, Monks said, drawing parallels with May, when a spate of poor data thwarted a widely expected rate hike.

One measure of financial market pricing after Wednesday’s figures showed a roughly 70 percent chance of a move next month compared with nearly 80 percent before BOEWATCH.

PRESSURE IN THE PIPELINE?

On Tuesday data showed British workers’ wages rose at the slowest rate in six months during the three months to May despite a record number of people in jobs, challenging the BoE as it considers raising rates next month.

A Reuters poll of economists published on Tuesday showed 47 out of 75 thought the BoE would raise rates to a new post-financial crisis high of 0.75 percent in August. The remainder thought it would stay on hold. [BOE/INT]

Some economists said the weakness in June’s inflation data was driven by volatile components such as clothing, computer games and air fares which could soon rebound.

The ONS reported the biggest month-on-month drop in clothing prices for any June since 2012 as shops slashed prices for the summer sales.

Wednesday’s data suggested rising pressure in the pipeline for consumer prices, however.

Manufacturers increased the prices they charged by 3.1 percent in June compared with 3.0 percent in May. While a slightly weaker increase than expected, it marked the strongest rise this year.

The cost of raw materials – many of them imported – was 10.2 percent higher than in June 2017, the strongest rise in a year.

“The continued pick-up in producer prices suggests that inflation may rise a little in the short term as the recent oil price increases pass through supply chains,” said Suren Thiru, head of economics at the British Chambers of Commerce.

But any period of rising price growth was likely to be temporary, he added.

Source: UK Reuters

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UK economy brightens as Bank of England nears rate decision

Britain’s economy picked up a bit of speed in May after slowing in early 2018, according to official figures that will give the Bank of England more confidence about raising interest rates next month for only the second time in over a decade.

A new monthly reading of gross domestic product showed the world’s fifth-biggest economy grew by 0.3 percent in May from April, the strongest performance since November and up from growth of 0.2 percent a month earlier.

The figure was in line with the forecast in a Reuters poll of economists, but sterling fell. Growth came mostly from the dominant services sector while factory output disappointed, the Office for National Statistics said.

“There is good news and bad news in this release, but on balance the Bank of England will likely focus on the good,” HSBC economist Elizabeth Martins said.

The good weather that helped spending in May continued into June and July, promising a pickup in growth. A British Retail Consortium survey earlier on Tuesday also showed a boost to sales from the soccer World Cup.

“Whether this pace of growth is sustainable, once the good weather and World Cup end, is another question,” Martins said.

Governor Mark Carney and other BoE officials opted not to raise rates in May because of the winter slowdown and decided to wait to be sure cold weather was to blame, not broader problems ahead of Britain’s exit from the European Union next year.

 However, Prime Minister Theresa May’s attempts to keep a grip on the ruling Conservative Party, which is deeply split over Brexit, could yet affect confidence among employers, a potential new hurdle for the BoE.

In the three months to May, Britain’s economy grew by 0.2 percent after stagnating in the three months to April and was 1.5 percent bigger than in May last year, the ONS said.

Bolstering hopes of momentum returning to the economy, GDP looks set to grow by 0.4 percent and 0.5 percent in the second and third quarters, the National Institute of Economic and Social Research, a think tank, said.

The BoE is expected to raise rates by 25 basis points to 0.75 percent on Aug. 2, according to a Reuters poll of economists. It raised rates in November for the first time since before the financial crisis and has signaled it will raise them gradually over the next three years.

SERVICES-LED GROWTH

The ONS said the warm weather and spending around the royal wedding of Prince Harry and Meghan Markle helped the economy.

Britain’s services industry grew 0.3 percent month-on-month in May, slowing from an upwardly revised 0.4 percent in April.

Over the three months to May, growth in services — which makes up 80 percent of economic output — picked up speed to 0.4 percent from 0.2 percent.

But industrial output fell unexpectedly in May by 0.4 percent on the month, hit by the shutdown of the Sullom Voe oil and gas terminal.

Manufacturing growth also disappointed, rising only 0.4 percent on the month — less than half the growth rate expected in the Reuters poll.

May capped the weakest three months for British factories since December 2012.

There was better news from construction, which had struggled in the bad weather of early 2018. Output jumped 2.9 percent in May, far exceeding expectations and marking the first growth in the sector since December.

Separate data showed Britain’s deficit in goods trade during May was broadly unchanged from April at 12.362 billion pounds ($16.37 billion).

Source: UK Reuters