Aberdeen: Bank of England relies heavily on scenarios
Luke Bartholomew, Deputy Chief Economist at Aberdeen, comments on today’s Bank of England interest rate decision:
'The decision to keep policy on hold today was widely expected. Instead, the market was much more interested in how the decision was communicated, especially given the hawkish lurch at the last meeting, which was subsequently walked back.
This time the Bank has leaned heavily on its scenarios approach to describing the outlook and risks which should help to clarify the reaction function, and the data policymakers will be watching to decide how to set policy.
We are still minded thinking that the recessionary risks facing the economy will limit any second round inflation effects, and so caution against tightening policy. But if oil prices continue to move higher, it is hard to see how the Bank avoids having to hike later this year.'
