Interest rate hike in line with forecasts
Wage settlements erode the inflation outlook
Capital account liberalisation could widen the output gap
GDP growth in line with CBI forecast
Signals large rate hike in August
In this morning’s statement, the MPC signals that a sizeable rate increase is likely in August, followed by further rate hikes in the coming term. According to the MPC, this is necessary in order to ensure price stability over the medium term. At the CBI press conference this morning, the Governor said it was highly unlikely that a rate hike would not be needed in August, but that the size of the increase would depend on near-term wage drift and the degree to which negotiated pay rises were passed through to the price level.