Ashton Whiteley: UK economy will enter unknown territory if it hikes rates this week as anticipated.
SHANGHAI, CHINA, November 01, 2017 /24-7PressRelease/ — Ashton Whiteley – With economic growth appearing weaker than at any other time before a rate hike in the past 20 years, the Bank of England will step into unfamiliar territory this week when it is anticipated that it will raise interest rates for the first time in 7 years.
After slashing rates to a record low in August of last year following the Brexit referendum in which the UK voted to exit the European Union, the BoE is now following in the footsteps of the US Federal Reserve and the European Central Bank. Both the US Fed and the ECB are either reducing stimulus or increasing rates.
With a quarterly growth rate of 0.4 percent providing the weakest setting to any rate hike in 2 decades, Britain’s economy could be entering a period of uncertainty. In contrast, both the United States and the euro zone are experiencing a period of strong growth.
Although UK inflation is a full percentage point higher that the BoE’s target and is at a five year high, this is largely due to the weaker pound. The pound has been, on average, 11 percent weaker against currencies of the UK’s primary trading partners since the Brexit referendum.
Economists at Shanghai, China-based Ashton Whiteley commented that, in the past, if inflation was causing currency irregularities, the BoE would overlook the inflation spikes as these situations were seen as temporary.
Ashton Whiteley economists added that it is anticipated that inflation will fall once again, albeit slowly, as the BoE evaluates pending domestic inflation pressures.
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