MPC-ometer not yet in rate hike zone
Simon Ward
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A minority of economists now expects UK official rates to rise over the summer. I remain of the view (now the consensus) that rates will stay on hold but will be guided month-to-month by my MPC-ometer model.
The MPC-ometer correctly forecast the 8-1 vote for no change in June, with ritual dovish dissent from David Blanchflower – see here. With two-thirds of the inputs available for July, the model suggests a hawkish shift but less than would be necessary to generate a prediction of a rate increase. The current reading is consistent with either 8-1 for no change (one hawk voting for a 25 bp hike) or 7-2-1 (two hawks counterbalanced by one dove seeking a cut – no prizes).
Important influences on the final forecast will include consumer confidence and inflation expectations on Friday and the manufacturing and services purchasing managers surveys next week (Tuesday and Thursday respectively). The MPC meeting is the following week and the Committee will have early access to June inflation figures.
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