- BoE conflicting data puts Mark Carney in an awkward position
- The market should expect only one hike over the next three years, Carney says
- EU and US central banks look to hold monetary policy steady over the next year in regards to rates
(LONDON) — The Bank of England’s Ben Broadbent wants to go ahead and raise rates, but his colleague Gertjan Vlieghe disagrees and highlights some weaker than expected economic data.
During a press conference last month, the BoE Governor, Mark Carney, told investors that they would be “wrong to price in just one rise in rates over the next three years.”
Data out on Tuesday showed despite Brexit fears, wages in the UK are growing. The number came in at 3.1%. The market anticipated lower average hourly earnings at just 2.9%.
The market expected the claimant count number on Tuesday to read 12.3k. — the number came in higher at 23.2k. BoE’s Vlieghe implied that due to the data showing signs of weakness, rate rises should remain on hold.
Mark Carney is in an awkward position. Real wage numbers contribute to inflation, and why Brexit uncertainty remains, and so does the uncertainty of rates.
The BoE’s main interest rate sits currently at 0.75%. The BoE has increased this twice since Brexit. The Brexit referendum result caused the bank to slash rates to 0.25%.
Outside the UK central banks look to cut rates and restart QE
Over in the US, Fed chair Jerome Powel hinted to the market that he might be on the side of cutting rates if the trade war intensifies with China.
The US Fed Funds Rate interest rate is currently at 2.5%. The Federal Reserve has lifted rates at nearly every opportunity since 2017.
The ECB, on the other hand, has opened the door for further QE and quashed any hopes for a rate hike this year, saying “it would delay its first post-crisis increase until the middle of next year.” — the Euro fell sharply against the dollar. The USD is currently up 0.5% against the Euro following the ECB’s press conference.
Continued strength in the USD suggests the market does not expect a rate cut from the Fed soon.