FXstreet.com (Barcelona) - With the MPC only half way through
the latest £50bln expansion of its QE programme, the Capital
Economics team believe that the main interest will be in whether
Committee voting was unanimous or not.
If so, they believe that it could give an indication into whether
or not the Committee plans to extend the current QE programme
further. They explain, "Given the Committee's view that time is
needed to assess the impact of the Funding for Lending Scheme (
), we expect August's unanimous vote to hold rates at 0.5% and
leave QE unchanged at £375bn to be repeated in September."
They see August's fall in inflation as suggesting that July's rise
was just a temporary blip away from its downward trend. "The drop
in CPI inflation from 2.6% to 2.5% entirely reflected a fall in the
core rate from 2.3% to 2.1%. July's core inflation rate had been
boosted by the earlier than usual end to high street sales and a
sharp Olympics-related rise in air fares inflation, so a drop back
in August had always looked likely."
They "anticipate a bigger drop in inflation in September - perhaps
to 2% - as the anniversary of last year's utility price hikes is
reached." Elsewhere however, they believe that the weak economy
should push core price pressure down further, keeping inflation low
They conclude, "Overall, while inflation's recent downward progress
has been slow, the prospect of a further decline below the MPC's
target should ensure that the Committee feels free to provide the
economy with further stimulus - in the form of more QE and perhaps
even a rate cut - later this year."