In September 2008 the UK started cutting interest rates in response to the financial crisis. Between then and March 2009 we dropped from 5.0% to 0.5% and have maintained that rate since then, over 5 1/2 years later.
The Monetary Policy Committee has been steadfast in their voting over that period but all good things come to an end. The time is approaching when the ship needs to change course and that time is edging ever nearer.
Before Mark Carney commented that wages won’t be an issue when deciding rates I had all but given up on seeing a change in vote this week. Now though, there’s a slightly greater risk that we do.
If we see one vote in favour of hikes then cable will pop, but given the USD strength over the last couple of days that maybe short lived. If two or more vote for a raise then I can see at least 100-200 pips being tacked on.
It looks like there some very mild optimism buying going on now and that may well be wiped out if the votes stay 9-0 in favour of unchanged. The longer we go on without a change in vote the more anxious the market will get.
Rate rises are coming as sure as the sun will rise each day. All the market wants to know is when.
fuse
