The Bank of England (BoE) looks set to keep steady this week, with the Monetary Policy Committee (MPC) presiding over what is likely to be somewhat of a predictable rate decision. However, while there is little doubt that the committee will retain the current level of monetary accommodation, this meeting remains a significant gauge for markets to assess when it will be seeking to raise rates once again.
The first quarter (Q1) saw the BoE disregard much of the weak data due to weather related issues, which saw the construction sector in particular dragging gross domestic product (GDP) growth lower. However, Q2 has been somewhat mixed in terms of data, with a decline in average earnings one of the chief concerns. Inflation is always going to be one of the key drivers of monetary policy, and with UK consumer price index (CPI) declining 0.7% over the past six months, many believe that the BoE are going to be increasingly hesitant to start looking to raise rates. That being said, CPI remains well above the 2% target, and with the influence of rising crude prices yet to be felt, there is reason to believe that the committee will look past the current trajectory of UK CPI.