Steve Smith looks at data from the Bank of England.
The UK base rate is still at 0.5% per annum after 5 and a half years at this level. The minutes of the 6/7th August Monetary Policy Committee meeting show that the vote to hold at that rate was split with 7 members voting to hold and 2 members voting against preferring an increase to 0.75% per annum.
Despite this voting split and the subsequent wide comment about the timing of the expected increase in base rate 3 month GBP LIBOR held steady throughout the month and into September. However the rising trend in 1 year GBP LIBOR is pricing in at least two 25 basis point increases in the next 12 months.
Based on trends in GBP LIBOR the first increase in UK base rate looks more likely to be in Q1 2015. A couple of months ago my view was that the first increase would be in Q4 2014; whilst the probability is reducing an increase before the end of 2014 cannot be ruled out.
