This week all eyes will be on the Monetary Policy Committee’s decision on UK interest rates:
The big interest rate decision
In his speech after the Referendum result, the Governor of the Bank of England moved to reassure markets by saying that the BoE will do everything in its power to support economic growth, including lowering the base rate. Expectations are running high that this will come as soon as this Thursday, or at the latest, in the August Inflation Report.
With the drop in the central bank interest rate pretty much a given, attention will turn to the other policy levers at the BoE’s disposal, mainly the already announced cut in bank capital requirements and the trajectory of its Quantitative Easing program. Keep an eye out for the tone in the MPC minutes, which should give a signal on the magnitude of the BoE’s downgrade to UK economic growth forecasts published in August.
What’s up with bricks and mortar?
The impact of Brexit on different sectors in the economy has been wildly debated since the referendum result. Perhaps the only area of agreement is that the construction sector is set for some tough times ahead. Data this year has already been weak, with uncertainty over the Referendum result taking its toll on residential construction and investment. Construction output in April fell by a three-month average of 2.1%. Another slump in May is firmly on the table.