(Sharecast News) - Goldman Sachs said in a note on Wednesday that it still expects the Bank of England to leave rates unchanged this year - even if a new leader emerges for Labour - as financial conditions have tightened and the labour market continues to loosen.
"That said, we see a low hurdle for the BoE to deliver a couple of hikes during the summer if energy price pressures continue to build," the bank said. "But we see no immediate implications from higher political risk for the BoE."

Goldman said that while more expansionary fiscal policy under a new Labour leadership could eventually require higher rates, the bank's analysis "does not support the idea that the Monetary Policy Committee has historically responded to rising fiscal risks by raising Bank Rate".

It added that more broadly, "policy choices will remain constrained by the challenging backdrop of rising spending pressures and an already elevated tax burden irrespective of any changes in leadership".

Separately, Morgan Stanley said in its 'European Economics Mid-Year Outlook' that it was sticking to its "out-of-consensus constructive view on UK's capex-driven growth model" and that in its base case, the BoE will keep rates on hold this year, and deliver one cut next year.

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