AMI director Robert Sinclair, Tenet Lime managing director Gemma Harle and Private Finance director Melanie Bien agreed the MPC Minutes the morning of the Budget and the Chancellor’s prediction inflation would remain up at between 4 to 5% this year make a rise within the next two months less likely.
Sinclair said the Office for Budget Responsibility’s (OBR) revised projections for GDP growth for 2011-12 down to 1.7% from 2.1% meant tax take will also be lower than hoped.
“As such, any rate rises could stifle the economy and are less likely to happen because any stop on the economy could increase the danger of a double dip, which would be catastrophic,” said Sinclair.
“That’s the real juggling act that follows now,” he added.
Harle agreed, adding: “Hopes of a rate rise are largely wishful thinking on the broker front.”
Bien predicted the first rate move in “September at the earliest.”
Robert Sinclair suggested there might be a vague chance of a move in July, but agreed with Bien September was more likely and then probably just 0.25% basis points.
Bien said: “Because we’ve had it so low for so long, rates won’t need to rise by much to have an impact. Actually, just by starting to rise, rates should affect the market.”