Credit Suisse pushes back BoE rate hike call to 2017

Economists at Credit Suisse pushed back their call for the first increase in Bank Rate from August 2016 to February of 2017 because the economy was set to slow enough, in the very short-term, to even prompt talk of another interest rate cut.

Lower oil prices, weak wage growth, uncertainty linked to the EU-referendum, weak manufacturing, exports and fiscal tightening were all expected to weigh on the economy over the next few months, Credit Suisse´s Neville Hill and Sonali Punhani said in a research note sent to clients.

"The soft patch of data implies that we can expect dovish rhetoric from the Bank of England in the coming few months and possible talk of easing if data deteriorates further" they said.

Furthermore, the Monetary Policy Committee was still focused on finding evidence of a sustained rise in wage growth and inflation and, in that regard, they added "we still have a long road ahead."

Nonetheless, the Swiss broker said it still expected to see a turnaround in growth and domestic inflation in the back half of 2016, with both following a U-pattern.

By February 2017 enough evidence would have accumulated to back hiking interest rates then, they said.

Their risk scenario was that activity deteriorated more than envisaged, which would stoke talk of easing from the MPC. The said that would be possible if they saw: "a further significant fall in oil prices, a large drop in core inflation, weak wage growth, a negative shock to UK growth due to a global slowdown or the UK voting to leave the EU or sustained weakness in nominal growth leading to a recession driven by corporates."

"While a rate cut is unlikely, we may get one or two members discussing or voting for a cut if things get worse, causing volatility in the markets."