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BoE under pressure as rate rise expectations grow – reports

by: IFAonline
  • 02/09/2013
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BoE under pressure as rate rise expectations grow – reports
Positive data pointing to the increasing pace of the UK economy is putting the Bank of England (BoE) under greater pressure to rein in market expectations of an interest rate rise.

The Telegraph reports manufacturers are enjoying a surge in activity with output rising to a three-year high, according to a survey from lobby group EEF. This was also confirmed by the latest PMI survey.

The report also said analyst Hometrack reports Britain’s property market is enjoying its best conditions since the beginning of the financial crisis. House prices are growing at their fastest rate for three years, the report said.

It said these improvements put greater pressure on governor Mark Carney as he tried to convince markets that interest rates will stay low until at least mid-2016, which was signalled in his “forward guidance”.

“As Harold Macmillan commented on the most important factors driving his decisions as Prime Minister: ‘Events, dear boy, events,’ ” Andrew Sentance, a former Monetary Policy Committee (MPC) member, writes in Telegraph today.

“If the recovery does gather momentum in the UK, events may force the hand of Mark Carney and the MPC, causing interest rates to rise sooner rather than later.”

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