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UK Bank of England Interest Rate Announcement (11:00 GMT): The policy rate for Britain is widely expected to remain unchanged at 0.50 percent and so by monetary standards todays announcement will be relatively low key. That said, in the wake of stronger economic numbers for Britain lately the market will focus on any clues for how (of if) the central banks policy outlook is changing. Inflation is still running well above BoEs target, which has been a non-issue in the past because the economy was suffering. But as the trend of upbeat macro news rolls on, the above-target rate of inflation increasingly serves as a reminder that monetary stimulus is living on borrowed time. Indeed, consumer prices inched higher in June on a year-over-year basis to 2.9 percent versus 2.7 percent in May, which is to say well above the two percent medium-term target.
In the previous announcement (July 4), the central bank reasoned that tightening policy would still weigh on the banks forecast for moderate economic growth and inflation. In the Committees view, the implied rise in the expected future path of [the] Bank Rate was not warranted by the recent developments in the domestic economy, the BoE explained. Three weeks later, there are several additional economic reports to considernumbers that suggest that the recovery is sustainable and perhaps strengthening. That includes last weeks news that Q2 GDP growth in the UK accelerated to a 0.6 percent pace (quarter over quarter), or double Q1s increase. None of this is expected to trigger an increase in the BoEs policy rate, at least not today. But Ill still be reading the banks statement for hints on what to expect now that the economy appears to be on a moderate but relatively robust growth path.
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