The Bank of England is to announce interest rate policy on Thursday, with a Reuters poll of Economists that any hike will be pushed back in August.
The widely anticipated hike could be pushed back due to a very weak first quarter of just 0,1%, suggesting the British economy has hit on a major break. Adding an interest rate hike would possibly tip the economy in recession territory.
The UK economy experienced its worst quarter in five years.
Some say this is largely due to extreme weather conditions, delaying construction and disrupting logistics this winter. Others suggest there are concerns over decelerating foreign investment.
Currently, the Bank of England rate stands at 0,5% and is expected to rise to 0,75%, probably later this summer rather than now. The first rise in a decade from the historical lows of 0,25% started in November 2017.
Inflation in the UK remains beyond the 2% inflation target and this pressure is likely to increase given the latest surge in oil prices. Meanwhile, inflation is eroding wage growth, which is currently below 1% despite conditions of near full employment. An interest rate hike would be consistent with policy, but as the Bank of England is expected to change its forecast to lower growth.
Markets are already factoring a delay in interest rates hike, with the pound falling this week to a four-month low. Traders expect the currency to rally, depending on the outcome of Brexit negotiations; for the moment, most polls still project an orderly Brexit.