‘Slow and gradual’ UK interest rate rise will be too little, too late – Brooks Macdonald
The ‘slow and gradual’ UK interest rate outlined by the Bank of England will be too little, too late, according to Brooks Macdonald’s Toby Thompson.
The ‘slow and gradual’ UK interest rate outlined by the Bank of England will be too little, too late, according to Brooks Macdonald’s Toby Thompson.
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The Bank of England’s monetary policy committee is still united in holding the base rate at 0.5%, according to minutes from the last meeting released today.
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George Osborne’s announcement that the government is to sell its stake in Royal Bank of Scotland may lead to shareholder upside according to industry experts, though investors should exercise caution.
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The prevailing consensus has settled around the expectation that the first UK interest rate hike is a considerable way off, but there are reasons to think this could quickly change once again.
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The minutes from the last Bank of England monetary policy meeting have revealed there remains little dissent within the committee, with all members united in holding rates steady at 0.5%.
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Aside from revising growth lower and putting an end to sterling’s election-led rally, The Bank of England’s May inflation report once more placed the spotlight firmly on productivity growth as the possible bad apple that could upset the whole cart.
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Inflation should return to its 2% target within the next two years, the Bank of England said on Wednesday, but labour productivity remains the key uncertainty, as it downgraded its forecast for UK GDP growth from 2.9% for 2015, to 2.5%.
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Markets were buoyed on Friday by the unexpectedly clear triumph of the Conservatives, but while one question hanging over investors and the country has been answered a bigger one now looms.
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Policy divergence will reach a breaking point and either drag the US and UK back into quantitative easing or trigger widespread reflation, says Rathbones’ Bryn Jones.
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Both the International Monetary Fund and the European Central Bank have made significant statements on global economic issues, with the former issuing a warning and the latter offering reassurance.
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Worries over UK deflation are misplaced, says Cazenove Capital Management CIO Richard Jeffrey, the forward outlook is promising.
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According to a survey by the Bank of England, inflation expectations for the next 12 months among the general public fell to the lowest since November 2001.
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