The expectancy Bank of England to raise interest rates in November is rising

The Central Bank of England is right, cautiously to signal that there is a rise in interest rates. More important, however, is actually to realize its intention, as a subsequent delay may have irreversible consequences for the economy.

Mark Carney, the manager of the BOE, has been criticized for not being reliable, but ultimately the regulator is dealing with "unusual circumstances". The Brexit referendum last year plunged into chaos, politics and the economy, and inflation is likely to exceed 3%, while economic growth is anemic.

Under normal circumstances, interest rates would probably have been higher, because in principle it would be good for inflation to be above the target level.

But the difficult choice does not negate the need for solutions. And the BOE signals a "modest" withdrawal of incentives, in the "coming months". According to most market participants, this should happen next month.

In order to keep its status as a stable institution, the BOE should raise interest rates sooner rather than too late. If there is another hesitation, it would cause damage. Soon there was such a situation when, in June, Mark Carney in his speech in Portugal seemed to prepare the markets for the impending interest rate hike. This, of course, was the right decision given the weak inflation rate, but today it is 2.9% and is likely to exceed 3%.

Carney and his team could raise interest rates to 0.5% and signal that this is enough for now. This would send the message that the sense of urgency after the referendum has passed without any stated intentions for a series of promotions that the economy will not be able to bear. In addition, it is a withdrawal of incentives, not an attempt to limit activity. When it says inflation will exceed the target over the next three years, the bank suggests that it will not raise interest rates just to bring price growth back to the 2% target.

So at the November meeting it would be good to see a result. Central bankers will then have renewed macroeconomic forecasts and, unlike this week, Mark Carney will have a press conference to explain clearly what it means and what does not mean raising interest rates. This is the perfect time to raise interest rates from the British Central Bank.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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