The Old Lady of Threadneedle Street Turns Again!

– Abi Oladimeji, CIO at Thomas Miller Investment

Abi Oladimeji, Chief Investment Officer at Thomas Miller Investment, comments on today’s BoE interest rate decision:

“Following the Bank of England’s monetary policy meeting in February, the governor commented that earlier and more frequent increases would be needed. We disagreed with that assertion and stated that “given a few months, the Bank [was] likely to change its tune again.” And so it has turned out!

“In its latest about turn, the Bank of England has lowered its forecast for GDP growth for this year and also revised down its wage growth forecast, noting that the economy’s “temporary soft patch” was driven by severe weather in March.

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“Unfortunately, as we noted in February, important leading indicators for the UK economy were already pointing to weaker outlook for the year ahead before the incidence of bad weather in March. Failure to grasp this will inevitably lead to further flip-flopping by the Bank of England.

“Still, faced with an unanticipated loss of growth momentum, the BOE was right to be cautious. Forward guidance can be a useful weapon in central bankers’ armoury but it needs to be deployed with care.”

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