Interest rate rise on hold as service industries falter

Purchasing managers’ index rises by less
than anticipated

One-Minute Read

The IHS Markit/CIPS services purchasing managers’ index rose to
52.8 in April, an increase on 51.7 in March, but not as strong as
hoped. Economists had expected a rebound in April after activity
was curbed by March’s bad weather.

“The disappointing services data will add to expectations that
the MPC [Monetary Policy Committee] will take its finger firmly off
the rate hike trigger,” said Chris Williamson of IHS
Markit. “Any further slowing will also raise questions as to
whether the November rate hike may have been ill-timed.”

Analysts and investors had been very confident the Bank would
raise the rate to 0.75% on 10 May – The Times says the markets put
the chance at 90%, but that has now diminished to just 10%.

The poor performance of service industry is just the latest
blow, after last month’s weak growth and inflation figures, which
had already made a rate rise seem unlikely.

The pound, which had been rising on expectations of a rate rise,
has fallen back in recent days.