BoE expected to hold interest rates steady at 5 pct
The Bank of England looks set to leave interest rates on hold at 5 percent for the fifth month running this week, but expectations are rising that a darkening economic outlook will force it to cut rates later this year.
RBS profits up 9 percentAll 67 analysts polled by Reuters predict the central bank's Monetary Policy Committee will keep interest rates unchanged again at the end of its two-day monthly meeting as inflation is running at more than double the central bank's 2 percent target.
The nine-member policy committee was split three ways last month. Tim Besley wanted to hike rates to make sure high inflation spread through the economy.
David Blanchflower wanted to cut rates to ease the economic pain and has since signalled that he might even vote for a half-point cut in borrowing costs this month as he thought the economy was already in recession.
The remaining seven - led by Governor Mervyn King - thought no change was the best option given the competing risks. A similar analysis is expected this week as soaring utility bills are likely to push inflation to near 5 percent next month.
"UK economic growth stagnated in Q2, with domestic demand suffering its second successive quarterly contraction, but this is unlikely to trigger a Bank rate cut in September," said Ross Walker, UK economist at RBS Financial Markets.
"The August minutes did hint at a subtle shift within the MPC - the upside risks to CPI were judged to have 'eased a little' and the discussion was framed more explicitly in terms of the case for a rate cut - and a further dovish shift seems likely in September."
Many economists say the BoE could edge toward a cut in November as inflation may have peaked by then and could be heading downwards, particularly if the recent slide in oil prices continues.
The economic data, meanwhile, continue to be grim. House prices fell another 1.9 percent last month, according to the Nationwide building society.
That is being felt right across the economy as consumer confidence crumbles and retailers and construction companies take a hit. Many say the British economy could soon be in its first recession since the early 1990s
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