Bank of England's Forbes votes for rate hike, others may follow soon | Reuters
By William Schomberg and Andy Bruce | LONDON LONDON A Bank of England policymaker surprised investors by breaking ranks and voting to raise interest rates and some others said it would not take much for them to follow suit, the BoE said on Thursday, signalling a potentially bigger split soon.Kristin Forbes, who is due to leave the BoE in June, cast the sole vote in favour of raising Bank Rate to 0.5 percent, the first Monetary Policy Committee split since last July.
By William Schomberg and Andy Bruce
LONDON A Bank of England policymaker surprised investors by breaking ranks and voting to raise interest rates and some others said it would not take much for them to follow suit, the BoE said on Thursday, signalling a potentially bigger split soon.Kristin Forbes, who is due to leave the BoE in June, cast the sole vote in favour of raising Bank Rate to 0.5 percent, the first Monetary Policy Committee split since last July. The other eight MPC members all opted to keep rates at 0.25 percent to help the economy as Britain prepares to leave the European Union. The majority view showed the BoE remained in no hurry to follow the U.S. Federal Reserve which raised rates on Wednesday.BoE Governor Mark Carney said last month that Britain's economy faced "twists and turns" on the road to Brexit.But sterling jumped a full cent against the U.S. dollar to hit its highest level since March 1 on the news that more MPC members might vote for a rate hike soon. The yield on 10-year British government bonds hit their highest level in a month."It's definitely a shift," Ross Walker, an economist at RBS said. "It takes us to a point where there will probably be more dissent sooner than expected, unless of course the economy deteriorates more quickly than the Bank set out in February."
Adding to a hawkish shift in some of the Bank's tone, the BoE edged up its forecast for economic growth in the first quarter to 0.6 percent.No economist taking part in a Reuters poll had predicted that a MPC member would vote to change rates this month.Before Thursday's meeting, most economists expected no BoE rate hike until 2019, when Britain is due to leave the EU. But some analysts sounded less sure after the announcement."With the global data shifting up a gear, it is imperative that UK growth slows discernibly this year in order to prevent a potential rate hike later in the year," JP Morgan economist Allan Monks said, although he said he thought a rate hike in 2017 remained unlikely.
Vatsala Datta, a fixed income strategist at RBC, said investors were pricing a nearly 50 percent chance of a rate hike early next year, up from about 30 percent earlier this week.Goldman Sachs said it no longer expected the BoE to expand its bond-buying stimulus programme again this year.SIGNS OF SQUEEZE
Britain's economy surprised the BoE and almost all other economists last year when it withstood the initial shock of the Brexit vote. Last month, the BoE said it expected the economy to grow by a relatively strong 2.0 percent this year but was likely to slow after that due to uncertainty about the country's future ties with the EU which buys about half of Britain's exports.This week, most of its policymakers pointed wage growth that was "notably slower" than they had thought and "some signs that the squeeze in households' real income growth was feeding through into spending" as inflation picks up on the back of the post-Brexit vote fall in sterling.However, among the eight-strong majority, "some members noted that it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted," the minutes said.Analysts said Ian McCafferty, who voted for a rate hike in early 2016, was the most likely MPC member to join Forbes. Other candidates included Michael Saunders who sounded upbeat about the economy in a speech he made in January.Forbes, who is due to return to her career as a U.S. academic after leaving the BoE in June, had previously signalled that she was getting uncomfortable with keeping rates on hold. (Writing by William Schomberg, editing by Pritha Sarkar)
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By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.