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BoE future rate hikes will have little impact on UK property

The Monetary Policy Committee kept the Bank of England base rate at 0.5 per cent for March, but previously warned that due to inflation and strong economic performance, rates are likely to rise faster than previously expected.

Some economists are predicting a 0.25 per cent rise as early as May, with potential for another increase later in the year.

Against this backdrop, is now a good time to invest in residential property?

Yes, for three key reasons.

First, we expect the impact on house prices of small interest rate rises will be concentrated in more expensive markets where people need very large deposits and higher incomes to support higher mortgage costs.

We’ve already seen house price falls in parts of London and the surrounding commuter belt, and affordability pressures and other economic uncertainties could lead to further reductions.

However, the Mortgage Market Review to stress test new mortgage offers against higher interest rates provides significant protection against default and, crucially for investors, house price falls are not a consistent story across the country.

In contrast to London, we’re seeing house price rises across the Midlands, south west and some of the northern regions. We expect house price growth in these areas to continue, albeit at a slower rate, regardless of Brexit uncertainty and interest rate rises, as average earnings have kept pace with house prices, aiding affordability.

Second, when investing in residential property, rental income is as important as capital growth, if not more so.

Private rental income, in contrast to commercial property, has proven to be extremely resilient across all economic cycles.

Fundamentally, we all need somewhere to live and the UK has a serious problem with undersupply of housing.

The government has said we should be building around 300,000 new houses a year, but in the last decade we have not even reached 200,000 a year.

Help to Buy and changes to stamp duty for first-time buyers have largely failed to stimulate growth in supply.

Brexit will not change this basic problem: even if immigration were to fall, with a growing domestic population and increasing longevity, the number of UK households will continue to rise.

And with uncertainty around interest rates, more people may choose the flexibility of renting rather than buying.

A significant minority of rented homes fail to meet Decent Homes Standards, meaning landlords of high quality, modern homes have an increased chance of attracting good tenants.

These factors all point to continued demand for well managed private rental accommodation and the outlook for residential rental income remains strong.

And finally, residential property offers an important diversification opportunity for both capital and income risk.

As an asset class, it shows low correlation with UK equities, fixed interest and cash over the medium- to long-term, through a combination of lower volatility and different underlying drivers and provides a diversified stream of income compared to traditional sources, such as bonds or dividends.

It also has a different risk return profile to commercial property and greater liquidity due to residential’s smaller average property sizes and larger volumes of transactions. As every property is different, investment at scale in the sector can be used to spread risk across a variety of locations and property types, and a large number of tenants.

Historically, residential property has provided attractive returns and low volatility over the longer term, regardless of the economic cycle, alongside low correlation to other mainstream asset classes.

Changes in interest rates will not change these fundamental investment benefits.

Alan Collett is chairman and fund manager at Hearthstone Investments

Source: FT Adviser

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Interest rate rises ‘can harm’ mental health

RESEARCHERS from the University of Stirling have warned that interest rate hikes can damage the mental health of people in debt.

The news has come ahead of a Bank of England rate-setting meeting this week, with rates expected to remain unchanged before a rise in May.

Researchers at the universities of Stirling and Nottingham, conducted a study involving more than 15,000 people in the UK.

Funded by the Economic and Social Research Council and published in the Journal of Affective Disorders, the study found that for each one per cent increase in interest rates, there was a 2.6 per cent increase in the incidence of mental health issues experienced by those heavily in debt. UK-wide, researchers estimated each percentage point increase would result in 20,000 additional cases of mental health difficulty – at an overall cost to society of £156 million.

Lead researcher, Dr Christopher Boyce from the Stirling Management School, believes the study – which is the first of its kind – has important implications for economic and social policy.

He said: “Whilst it is important to avoid high unemployment and instability – which in themselves can be detrimental to mental health – central bankers need to understand that the tools they use to maintain economic stability can also have direct consequences to mental health.

“Low interest rates encourage the uptake of debt, potentially creating unsustainable debt levels and putting many at risk when there are future interest rate rises. When this happens, we need to ensure those in debt receive adequate support.

“One way to improve the economy, as others have argued, while at the same time reducing the mental health risk for individuals, would be to give people money in the form of a debt jubilee.”

Bank of England governor, Mark Carney, has already warned borrowers that rates will need to rise “somewhat earlier and by a somewhat greater degree” to meet inflation targets.

Source: The National

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Interest rates to be kept on hold, but May hike ‘still in play’

The Bank of England is expected to keep interest rates unchanged at 0.5% next week, but the meeting will be watched closely amid expectations over another hike in May.

Governor Mark Carney has already warned borrowers that rates will need to rise “somewhat earlier and by a somewhat greater degree” to get inflation back on target after stronger-than-expected growth in the economy.

Experts believe the comments last month paved the way for another quarter point rate rise as soon as May, with one more due by the end of the year, and another in 2019, which would see rates climb to 1.25%.

Investec economist Philip Shaw said that some of the nine policymakers on the MPC may even call for an immediate 0.25% rise.

“Although the MPC will most likely stand pat next week, we would not be surprised to see some dissent on rates, with one, or even perhaps two, members backing an immediate 25 basis point hike in the Bank rate,” he said.

Likely candidates are Ian McCafferty, Michael Saunders or Andy Haldane, according to Mr Shaw.

“This should smooth the way for the committee to make a move on rates in May, as long as this is still warranted by the economic data,” he said.

Official inflation figures are also out next week and Investec predicts they could see the Consumer Prices Index dip to 2.7% in February from 3% in January.

But Mr Shaw said this would be unlikely to dent the MPC’s view that more rate hikes are needed.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, is pencilling in an easing of inflation to 2.8% off the back of falling oil prices.

He said: “The fall in oil prices to 65 US dollars, from 70 US dollars in early February, has increased the chances that inflation undershoots the MPC’s forecast over the coming months.”

However, the meeting comes amid signs that the economy is struggling to pick up pace.

Official figures showed the economy grew by less than previously thought, up by 0.4% in the final quarter of 2017 against the 0.5% initial estimate.

This means it has remained in line with the 0.4% seen in the previous quarter, while experts are pencilling in 0.4% again in the first quarter of 2018 as construction and manufacturing sectors struggle.

Recent industry surveys showed the manufacturing industry drifted to an eight-month low in February, while the construction sector remains under
pressure from weak confidence and political uncertainty.

The powerhouse services sector continues to be a bright spot, unexpectedly reaching a four-month high in February, according to the most recent purchasing managers’ index.

Chris Williamson, IHS Markit’s chief business economist, said the services sector boost keeps a May interest rate hike from the Bank of England “very much in play”.

Meanwhile, the Office for Budget Responsibility hiked its outlook for economic growth this year – to 1.5%, from 1.4% previously predicted – in its Spring Statement forecasts.

It also said it believed inflation would fall back to the Bank’s 2% target this year.

The Bank is more upbeat on the growth outlook, pencilling in 1.8% expansion this year, although it is not so cheery on the path of inflation.

It said in its February report that rising oil prices would keep inflation above 3% in the short-term and see it take longer to return to target.

Source: Shropshire Star

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Why we don’t expect a UK interest rate rise until November

Forecasts for UK interest rates have moved significantly.

The Bank of England, which ordered an increase from 0.25 per cent to 0.50 per cent in November, has signalled that it is ready to raise rates faster than previously thought.

The Bank’s closely watched quarterly Inflation Report, published last month, pointed to the prospect of excessive economic demand emerging by 2020, raising concerns about inflation.

But rather than the detail of what was said, it was perhaps the choice of words that were more significant.

Monetary policy, the report said, would need to be tightened “somewhat earlier and by a somewhat greater extent over the forecast period”.

The Bank’s hawkish communication spurred money markets to quickly bring forward expectations of the next rate rise to May.

We take a different view.

A November rate rise?

We don’t expect the first increase to happen until November, as this is consistent with previous market expectations, upon which the Bank had based its comments. Beyond that, we expect another two rises next year, taking the bank rate to 1.25 per cent by the end of 2019.

Why is our forecast for the first rise later than that of the market?

Firstly, we don’t believe the Bank expected its comments to shift expectations so far. If it does hike as early as May, then markets will quickly price in a rate rise every six months. That would mark a huge increase from the previous guidance that rate rises would be “gradual and limited”.

Secondly, many investors appear to have ignored the ending of the Term Funding Scheme in February.

The scheme, which provided below market cost liquidity to banks in order to encourage additional lending to the public, is estimated by the Bank to have been worth about a 0.25 per cent rate cut. It may already be having an impact on saving and lending rates.

Finally, it is worth remembering that the Bank assumes a smooth path to Brexit with regards to the impact on firms and households.

Given the small working majority the government has in the House of Commons, and the obvious divergence of views with regards to whether the UK should remain in the single market and/or customs union, a smooth path to Brexit seems like the least likely outcome.

For more on the outlook for world economies and interest rates:

Important Information: The views and opinions contained herein are those of Azad Zangana, Senior European Economist and Strategist, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The sectors and securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This communication is marketing material.

This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA. Registration No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.

Source: City A.M.

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Most Britons expect Bank of England to raise rates in next 12 months – BoE survey

Most British people expect the Bank of England to raise interest rates again over the next 12 months, in line with indications given by the central bank, a BoE survey showed on Friday.

The BoE said 58 percent of people surveyed between Feb. 7 and Feb. 18 said they expected rates to rise, compared with 63 percent in its last poll conducted in November, just after the BoE raised rates for the first time in more than a decade.

Last month BoE Governor Mark Carney said rates might need to rise sooner and by somewhat more than the central bank had expected to get inflation back to target.

British consumer price inflation rose to its highest in more than five years in November at 3.1 percent, and stood at 3.0 percent in January. The BoE expects inflation will remain above its 2 percent target for the next couple of years.

Friday’s poll showed no change to households expectation for inflation over the next two years, with expectations holding at 2.9 percent for the next 12 and 24 months.

A Reuters poll on Thursday showed that a majority of economists expected the central banks to raise interest rates next in May, and financial markets see a high chance of a further increase before the end of the year.

Source: UK Reuters

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May UK rate rise still likely but Brexit obscures next moves

British interest rates are still expected to rise in May following a barrage of hawkish signals from Bank of England policymakers, but most economists polled by Reuters don’t see a follow-up move for another year.

Part of the hesitation stems from the fact that Britain’s economy has moved from leading to lagging all of its industrialised peers, and is facing its most far-reaching change since the Second World War: leaving the European Union.

Indeed, the latest Reuters poll found no upgrades to economists’ already modest inflation and growth forecasts.

The consensus view also showed the likelihood of a disorderly exit from the EU has held at 20 percent, where it has been all year, with but several saying that it had increased in the past week. The range was 5-60 percent.

The highest median probability was 30 percent reached in July 2017, and again last October.

All but one of the respondents in the poll, taken March 5-7, expected a transition deal will be struck. Nearly every respondent said the most likely eventual outcome from talks between London and Brussels would be a free trade agreement.

However, as has been the case for the last three polls in which that question was asked, the second most likely option was no deal, and Britain to trade with the EU, which takes almost half of the UK’s exports, under World Trade Organization rules.

Remaining in the European Economic Area, which would mean staying in the EU’s single market, was the third most likely option, trailed by cancelling Brexit altogether.

More than 90 percent of this same panel of economists said before the June 23, 2016 referendum that leaving the EU would damage Britain’s economy, trigger a fall in sterling, which in turn would push up inflation, all of which have taken place.

For now, the BoE remains set on tackling inflation, 1 percentage point above the 2 percent target, which it argues is stemming from an economy that has less capacity to grow, as well as historically very low unemployment.

“One of the main arguments supporting the case is that there are signs of demand strengthening while there are no signs of supply picking up,” note Barclays economists Sreekala Kochugovindan and Fabrice Montagne.

“While our central scenario remains a hike in August, this suggests that the risk that the Bank looks through soft data and delivers in May regardless is material.”

And it is by no means a done deal the BoE raises rates in May. Only a slight majority, 36 of 63 economists or 57 percent of the sample, are expecting a May rise to 0.75 percent. That proportion is roughly the same as February.

About 60 percent of poll respondents see Bank Rate at 0.75 percent at year-end and a third say 1.25 percent at end-2019, with one rise each in the second and fourth quarters, although there are fewer people willing to look that far out.

Inflation is set to slip from 3 percent presently to 2.2 percent a year from now, averaging 2.5 percent this year and 2.1 percent next, unchanged from the poll taken in mid-February.

Alan Clarke, head of European fixed income strategy at Scotiabank, says he is sticking to a long-standing forecast for a May rate rise to 0.75 percent.

“Nonetheless, we fully expect that rate call to be challenged in the coming months if CPI inflation does slow sharply,” noted Clarke, who forecasts inflation to dip to 2.5 percent by March compared with the BoE’s 2.8 percent view.

“As long as core services inflation – i.e., domestically generated inflation – does not fall as well, then the May rate hike is still in play.”

A separate Reuters poll on Wednesday predicted sterling would trade higher in a year, near $1.41, and keep steady around 88-89 pence to the euro. If correct, that would also keep a lid on imported price pressures.

But it is very difficult to forecast the future using traditional economic models, parsing base effects and estimating spare capacity, when the biggest economic uncertainty by far is the political solution to how Britain will relate to the EU.

Some respondents highlighted a wide gap that remains between domestic political expectations and what is actually on offer from Brussels and the other 27 EU members.

“The British government’s position continually fails to understand the EU27 starting point. Regulatory harmonisation is not enough – it will have to give up significantly more control to the likes of the European Court of Justice than the Brexit ultras are happy with,” notes Commerzbank economist Peter Dixon, on what he sees as a 20 percent chance of a disorderly Brexit.

“This raises the prospect of a domestic political split and if (Prime Minister) Theresa May sides with those pushing for a hard Brexit, the risk of such an outcome occurring will clearly have risen.”

Source: UK Reuters

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Bank of England’s Ramsden sees case to raise rates sooner than he thought

The Bank of England might need to raise British interest rates somewhat sooner than Deputy Governor Dave Ramsden had expected if wage growth picks up early this year, according to a newspaper interview released on Saturday.

Ramsden was one of two policymakers who opposed the BoE’s decision in November to raise interest rates for the first time in a decade, but appears to have shifted his stance somewhat in comments published by the Sunday Times newspaper.

Earlier this month the central bank said interest rates might need to rise somewhat sooner and by somewhat more over the next three years than policymakers had expected in November, due to a strong global economy and signs wages are rising faster.

“We all will keep a close eye on what happens through the early part of this year to see if that (BoE) forecast of wage growth picking up to 3 percent is realised,” Ramsden was quoted as saying by the Sunday Times.

“But certainly relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later.”

RATE RISES EXPECTED

Economists polled by Reuters expect the BoE to raise interest rates to 0.75 percent from 0.5 percent by May, and financial markets price in a high chance of a further rate rise to 1 percent before the end of 2018.

The BoE’s chief economist, Andy Haldane, told lawmakers on Wednesday that he thought interest rates might need to rise slightly faster even than the central bank had expected when it set out fresh economic forecasts early in the month.

However, Governor Mark Carney said at the same event that future monetary policy decisions would depend heavily on how businesses and consumers react to ongoing talks on the terms of Britain’s departure from the European Union in March 2019.

Britain’s economy underperformed other major advanced economies last year, due to a hit to consumer demand from higher inflation triggered by the pound’s fall after the Brexit vote, as well as comparatively weak business investment.

The unemployment rate also rose slightly in the final quarter of 2017, though at 4.4 percent it remains near a 42-year low.

Ramsden told the Confederation of British Industry on Friday that the economy could not grow faster than 1.5 percent a year without starting to add to inflation pressures.

Source: UK Reuters

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UK economic growth revised down at end of 2017

The UK economy grew at a slower pace than previously thought at the end of 2017, as production industries dragged growth back.

The Office for National Statistics today said GDP rose by only 0.4 per cent in the fourth quarter of 2017, 0.1 percentage points down from its first estimate.

The growth downgrade means the UK economy grew by only 1.7 per cent in 2017, lower than thought at first with a slower first quarter than earlier estimates. That meant a bigger slowdown from the 1.9 per cent expansion seen in 2016, and the slowest since 2012.

Business investment growth was flat in the fourth quarter, although it rose by 2.1 per cent over the year.

However, financial and business services provided a rare bright spot, with growth in the sector, which covers much of the City, revised upwards from 0.8 per cent to 0.9 per cent.

The figures show the importance of preserving the City’s trade access to the EU after Brexit, according to Stephen Jones, chief executive of the UK Finance lobby group.

“This is a timely reminder of the importance of financial services in talks over a future EU-UK agreement,” he said. “An ambitious free trade deal, underpinned by the mutual recognition of closely aligned standards, will help drive jobs and growth both in the UK and across the continent.”

The figures may inject some uncertainty into the Bank of England‘s interest rate plans, although monetary policymakers have previously emphasised that wage growth will be a key metric, given a lower “speed limit” for the UK economy.

“This is not an economy that needs cooling with higher rates,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics, with the Bank of England widely expected to increase interest rates in May.

While the economy “still appears to have gathered a little momentum in the second half of last year”, data suggest the economy “remains in a fragile state”, Tombs said.

GDP per head, which strips out the effects of a rising population, grew by 0.2 per cent in the fourth quarter, meaning it is only three per cent above the peak hit before the financial crisis.

The figures give further evidence of the overwhelming dependence of the UK economy on the services sector, which accounted for 1.3 percentage points of 2017 growth – although that represented a steep fall from the two percentage point contribution to growth in 2016.

Production industries, which include the manufacturing sector, contributed only 0.3 percentage points, in spite of manufacturers enjoying a “sweet spot” thanks to the 2016 devaluation of sterling.

The figures also show output from the agriculture industry did not grow at all for the second year in a row.

Source: City A.M.

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Bank of England rate rises could come faster than expected, chief economist warns

The Bank of England could end up needing to raise interest rates faster than investors expect, its chief economist told lawmakers on Wednesday, striking a slightly more hawkish tone than his central bank colleagues.

BoE Governor Mark Carney, appearing alongside Haldane, said there was no need to give a direct commitment on rates as markets broadly understood the BoE’s message – unlike in the months before November’s rate rise, the first in over a decade.

Britain is growing more slowly than other rich economies but is benefiting from a global upturn. Unemployment is close to a 40-year low, bringing higher rates back on the agenda despite the uncertainty for business about the shape of future trade ties with the European Union after Brexit next year.

The BoE said earlier this month it expected to raise rates sooner and by more than it had expected as recently as November.

Most economists now expect the BoE to raise rates to 0.75 percent in May, and financial markets see a roughly 70 percent chance of a further rise this year, taking rates to 1 percent.

Haldane, who sent an early signal last year that the BoE was heading for its first rate hike in over a decade, said growth was more likely to overshoot than undershoot the forecasts made by the BoE’s Monetary Policy Committee earlier this month.

That could require more tightening than the three rate hikes over three years which markets priced in at the time.

“I would judge the risks to the MPC’s latest projections, for both UK demand and inflation, as lying to the upside,” Haldane wrote in an annual report to parliament.

Both the world economy and Britain could do better, he said.

“In my view, this would put the balance of risks to the path of interest rates necessary to return inflation sustainably to target to the upside,” Haldane said.

Carney – who lawmakers have criticized for previous steers on rates that have not worked out – was more circumspect.

“Financial markets have started to move with the underlying data … so they’re better able to anticipate what we could do and … the need for direct almost pre-commitment of a raise goes away.”

NO HAND-BRAKE TURNS

Some BoE officials as recently as last year had emphasized the dangers of raising rates prematurely.

But Haldane took a different view. “Historically the thing that has really killed jobs has been central banks stepping on the brakes too late,” he told lawmakers of parliament’s Treasury Committee.

“We are absolutely clear we don’t want to be back there again because it’s bad news for jobs. And that means going in this limited and gradual way to head things off in advance, to prevent having to step on the brakes – a hand-brake turn.”

Asked about recent sharp moves in global financial markets triggered by concerns about central banks raising interest rates, Carney said the volatility was “small potatoes” and the most important factor for Britain remained the approach of Brexit and its effect on business and consumer confidence.

“Monetary policy is nimble. It will react to those expectations,” he said.

Haldane said if British economic growth held up at around the rates seen during 2017, and pay rises strengthened, then the case for higher rates was likely to be made.

Official data on Wednesday showed overall wage growth was stable in the three months to December but some economists said a month-by-month breakdown pointed to higher pay growth ahead.

Haldane said January 2018 data would probably show a marked pick-up in wage growth, which he expected would soon reach an annual rate of 3 percent.

Haldane also said sterling’s sharp fall after the Brexit vote in June 2016 had “worked its magic” in terms of boosting British exports.

But his Argentinean-born MPC colleague, Silvana Tenreyro, said her experience was that devaluations made people poorer, and Carney was quick to interject that weakening Britain’s currency was “not a good economic strategy”.

Source: UK Reuters

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Bank of England to send new rates message in last year before Brexit

The Bank of England is expected to say on Thursday that another interest rate increase could be nearing as Britain’s economy grows faster than expected ahead of its departure from the European Union in just over a year’s time.

The BoE raised borrowing costs for the first time in more than a decade in November, reversing a cut made in 2016 as the country reeled from the Brexit vote shock and taking them back to 0.50 percent.

The world’s sixth-biggest economy is lagging behind a strong global pick-up, due to a rise in inflation and fall in business confidence since the referendum.

But it has fared better than most forecasts made at the time of the Brexit vote, and it ended 2017 stronger than the BoE expected. The central bank has said it plans to gradually scale back its emergency levels of stimulus.

It is widely expected to keep rates on hold on Thursday as it weighs up the impact of November’s move on the economy.

Investors are more focused on whether any of the nine rate-setters voted for a hike. That would be seen as adding to the likelihood of an increase in May, the next time the BoE is due to update its economic forecasts.

Investors also want to see what the central bank’s updated forecasts for the economy say about its rate plans.

Investors see a nearly 50-50 chance of a new hike in May and some economists are predicting two increases this year alone. That would represent a big change from the BoE’s signal as recently as November of two hikes over the next three years.

One major factor beyond the control of Governor Mark Carney and the rest of the Monetary Policy Committee is what will happen to Britain’s attempts to negotiate a new trade relationship with the EU, its main trading partner.

Prime Minister Theresa May wants to clinch a transition deal next month to secure full access for Britain to EU markets for about two years after it leaves the bloc in March 2019.

“Although the MPC won’t explicitly say so given political sensitivities, we expect their decision in May to be almost entirely determined by whether or not a transitional deal has been fully agreed and signed by then,” UBS fixed income strategist John Wraith said.

After May, the BoE risks being unable to hike rates because soon after London and Brussels could be wrangling over their long-term relationship, weighing on the economy, he said.

SIGNS OF LIFE

There are signs that Britain’s economy is finally working off the hangover of the 2007-09 crisis.

Pay growth has gathered a bit of pace and Carney says it might overtake inflation this year, restoring some spending power to households. At the same time, many exporters are riding a wave of demand from the world economy.

The BoE is expected to raise its growth forecasts on Thursday. But it might also lower its view on inflation in two or three years’ time after sterling rose recently and bond yields in financial markets jumped, potentially reducing the chances of an intensification of its rate hike plans.

Reminders remain of the fragility in Britain’s economy as it faces up to leaving the EU.

The services, factory and construction sectors all showed weaker-than-expected growth in January, according to surveys. The housing market, which is key for consumer confidence, has steadily lost momentum since the Brexit vote.

Alan Clarke, an economist with Scotiabank, said stronger pay growth in the coming months was likely to seal the case for a rate hike in May, even if the BoE was unlikely to be explicit about this on Thursday.

“I think the message will be subtle and they will keep their options open,” he said.

Source: UK Reuters