BOE interest rate decision, investment commentary from Mark Nash

Mark Nash, head of global bonds, Old Mutual Global Investors

“There has been no change in interest rates by the Bank of England (BoE) as they clearly need more time to assess the new May government’s policies and to see the quarterly inflation figures that are to be released on 4 August. It is clear that any weakening of the outlook for the UK on Brexit concerns will lead to further easing in monetary policy.  The BoE’s Monetary Policy Committee judged this to be the case, and most officials expect an easing in August, which could be in the form of a rate cut of at least 0.25%.

The potential for quantitative easing (QE) is still on the cards, and is likely to follow the expected rate cut, in order to place funds in the hands of non-bank entities and support the UK economy.  A rate cut into negative territory looks unlikely however, given the negative impact on bank profitability and therefore credit provision, something Mark Carney has been clear about.  Other easing measures like providing banks with cheap funding for lending will also likely be available.

In all, the UK has little inflation and there are few signs the UK government will have any difficulty funding at very low interest rates.   So given this backdrop the BoE can afford to focus on growth risks and ease more as necessary, weakening the pound  and encouraging foreign investment and boosting competitiveness.

About the Author:

Mark joined Old Mutual Global Investors as head of global bonds in June 2016; he will take over as lead manager of the Old Mutual Global Strategic Bond Fund on 1 August 2016.

He previously worked at Invesco Asset Management since 2001, most recently as head of global multi-sector portfolio management and head of European fixed income strategy. Prior to that he held a number of roles at Invesco including, head of global macro alpha sources and senior fund manager. Mark is a CFA charterholder and has a chemistry degree from the University of Nottingham.