Major Economic Announcements Slated for Thursday, 4 August 2016
This is going to be an important week for the United Kingdom and the spillover effects will impact the global economy. For starters, Monday, 1 August will see construction PMI and CIPS manufacturing PMI for July being released in the UK. But the big decisions will be announced on Thursday, 4 August 2016 when the Bank of England will announce its interest-rate decision followed by the Monetary Policy Committee meeting minutes. The announcement will also include The Monetary Policy Committee vote hike, details of quantitative easing, the inflation report and other important economic data releases.
It has already been established that the Governor of the Bank of England, Mark Carney will downgrade growth forecasts for the UK economy moving forward. This is a direct consequence of the UKs decision to break from the EU in the June 23 referendum. According to Carney, the economy will likely be plunged into a technical recession, defined as 2 successive quarters of declining growth. MPC members will reveal their thoughts on the matter when the meeting minutes are released. It is expected that the UK’s growth forecasts for the remainder of the year will be near zero or negative. On Thursday, 14 July 2016, the market was surprised by the 8-1 decision by the MPC in favour of an unchanged interest rate.
Now, it is likely that the Bank of England will act decisively to address shrinking economic growth by cutting interest rates from the current level of 0.50%. A further loosening of monetary policy will have a stimulatory effect on the UK economy. It is still unclear precisely what impact a Brexit has had on the UK economy to date, and data will only be made available closer to September. The Bank of England is holding a double edged sword in this precariously balanced scenario. It can act by cutting interest rates to 0 or close to it, and then have no leeway to move if the economy does not react accordingly. It can also do nothing and run the risk of whatever transpires.
