Investment Clock insights

Another hawk unmasked


Ian Kernohan

21 June 2017

Having thought there were only two hawks left on the Monetary Policy Committee, it is now clear that there are three.  Andy Haldane considered a rate rise in June, but decided to wait. He clearly considers a tightening is needed well ahead of market expectations.  
However, our own view is that the impact of political uncertainty on business confidence and the continued squeeze on household real incomes make a rate rise unlikely. It is not yet clear if any weakness in consumer spending is being offset by investment and net trade. Domestic inflationary pressures and in particular wage growth remain very subdued, with most of the recent rise in inflation due to the temporary impact of sterling devaluation.

Having thought there were only two hawks left on the Monetary Policy Committee, it is now clear that there are three.  Andy Haldane considered a rate rise in June, but decided to wait. He clearly considers a tightening is needed well ahead of market expectations.  

However, our own view is that the impact of political uncertainty on business confidence and the continued squeeze on household real incomes make a rate rise unlikely. It is not yet clear if any weakness in consumer spending is being offset by investment and net trade. Domestic inflationary pressures and in particular wage growth remain very subdued, with most of the recent rise in inflation due to the temporary impact of sterling devaluation.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.