Azernews.Az

By Bloomberg

The combination of Greek uncertainty, a strengthening pound, tumbling oil prices and Chancellor of the Exchequer George Osborne’s commitment to further austerity may force a re-think by those Bank of England policy makers leaning toward an early interest-rate rise, Bloomberg strategist Richard Jones writes.

Speculation of an impending BOE rate increase has grown after comments from Monetary Policy Committee members last month. Martin Weale said in an interview with the Financial Times the bank should be ready to raise rates as early as August this year, and Kristin Forbes pointed out that inflation should "bounce back'' unless there are further sharp movements in the pound or energy and food prices.

Their comments echoed observations made in the BOE's Quarterly Inflation Report on May 13, when Governor Mark Carney noted that a "temporary period of falling prices driven by few components of CPI should not be mistaken for potentially damaging and widespread deflation.''

Brent crude has fallen over 14 percent since the QIR and the pound was the strongest currency in the Group of 10 in the second quarter. The Bank of England's own effective exchange rates index lingers within 0.4 percent of last week's seven-year high.

The impact of the Greek referendum "no'' vote has also damped investor expectations of BOE tightening. Market pricing for the first quarter-point bump has shifted to August 2016, from as early as May 2016 last week.

Osborne said the Greek crisis justifies his push for further austerity, which may also act to slow U.K. economic growth. He affirmed pledges made in this year's election campaign, including finding an additional 12 billion pounds in welfare cuts annually.