Economists are largely believing that the chances of a rate hike in May are "close to zero"
Last week's soggy GDP report dealt a somewhat fatal blow to the BOE's chances of raising rates during the upcoming 10 May meeting. I highlighted then that money market had already slashed the probability of a rate hike from just above 50% to start the day to between 20-25% as we closed off the week.
And it goes without saying the BOE has never followed through with a rate hike when the annual GDP growth - this time at 1.2% - was this weak.
Here is what some economists are saying:
John Wraith, strategist at UBS
"While the extent of the loss in momentum in Q1 may indeed have been exaggerated by the bad weather, we think there are deeper fundamental drivers of slowing activity that are set to persist. The slow motion slowdown we have warned of many times is continuing to materialise, and with inflation likely to return to target within the next 3-6 months, we believe the case for higher rates will look increasingly threadbare from both real activity and inflation standpoints".
James Smith, developed markets economist at ING
"The market reaction to this data has been a little extreme (first hike now priced in for December). It now looks more likely than not that the Bank will opt to wait until August to buy more time to see how things evolve. But policymakers will be acutely aware that this might be one of the best opportunities they get to raise rates this year".
More here.
