abrdn: BoE interest rates will remain high for the time being

abrdn: BoE interest rates will remain high for the time being

Monetary policy UK
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Luke Bartholomew, Senior Economist at abrdn, looks ahead to this week's Bank of England meeting.

'The Bank of England looks set to leave interest rates on hold at its policy decision this week, while signalling that rates will stay elevated for some time.

Problems with the calculation of the UK unemployment rate leaves the Bank with significantly less information than it would like or expect about the state of the labour market as it goes into its next meeting.

But with the broader suite of UK data continuing to point to a loss of momentum over the summer, and global market interest rates rising significantly recently, it is hard to believe that any policy makers who wanted to keep rates on hold in September will now want to increase them. Indeed, there is likely to be an even bigger majority in favour of keeping policy on hold this time than last time.

Given the mounting headwinds to the economy, with clear evidence now that past monetary tightening is starting to bite, we expect the next move in interest rates will be down rather than up, although this is unlikely to be until around the middle of next year.

For now, markets will probably be driven by international developments, including the evolving situation in the Middle East and turbulence in the US Treasury market.'