Earlier this week Haldane said the chances of a rate rise or cut are ‘broadly evenly balanced’ apparently confounding the consensus that only a rise was possible given the rate is just 0.5%.
However according to Axa IM’s senior economist David Page the comments should not be taken as an indication of a policy change.
Page said Haldane is concerned about the downside risks surrounding the presently low inflation environment but that this inflation level is not expected to persist beyond the first half of this year.
The other key point according to page is that Haldane’s views are not reflective of the monetary policy committee broadly, with commentary from governor Mark Carney in recent weeks sounding relatively hawkish.
Given all this Page now expects the first rate rise to be a little later with February 2016 being his estimate.
“At heart, these arguments underpin our reasoning to push expectations for the first Bank rate hike to February 2016, despite thinking that a September Fed hike would provide some ‘air cover’ for an earlier Bank rise in November 2015,” he said.
“However, as headline inflation shows more signs of recovering over coming quarters, inflation expectations concerns should abate,” Page added. “UK households have twice seen inflation in excess of 5% over the past seven years. I doubt they are going to quickly assume that inflation is a thing of the past.”
