When it comes to reasons for raising interest rates, the U.K. economy is ticking a lot of the boxes right now.
Growth that's consistently faster than expected, accelerating inflation, record employment and soaring consumer borrowing suggest the economy is running hot enough to weather higher borrowing costs. Traders have taken notice, responding to the latest signs of economic strength by raising bets on a Bank of England interest-rate hike by the end of the year.
But then there's Brexit, and that means the BOE doesn't expect the good times to last. The pound's drop since the vote to leave the EU is driving up prices and could knock back consumer spending. Compounding that drag, the central bank also expects investment to weaken, further undermining the domestic demand that's keeping the show on the road.
All of that poses a tricky challenge for Governor Mark Carney, who may upgrade the BOE's near-term growth forecasts again next week. But, based on his cautious view of the outlook, he may also want to keep rate-hike expectations in check, at least for now.
"If you didn't know we had a referendum last year, you'd be seeing exactly what we thought would play out with a Remain vote," said Allan Monks, an economist at JPMorgan Chase in London. "We had predicted the bank would be raising rates about now. The obvious difference is the expectation about what happens next, so there's a key test in the coming months."
While the economy expanded a faster-than-forecast 0.6 percent in the fourth quarter, it was helped by the August rate cut that Carney has claimed saved jobs and fueled the expansion after the referendum. That's a boost he's probably not prepared to reverse so quickly.
"The BOE has found every excuse it can get to not raise rates since 2011, so it doesn't surprise me that it's using Brexit as an excuse," said Andrew Lilico, the executive director of London-based consultancy Europe Economics, who chaired the pro-Brexit Economists for Britain group. "I don't expect them to be raising rates until they feel absolutely forced to, which will probably mean inflation going above 3 percent."
Policy makers currently see growth slowing this year and inflation picking up to 2.8 percent — above their 2 percent target, but they've looked through bigger deviations before. The median forecast of economists surveyed by Bloomberg this month is that the benchmark rate will stay at 0.25 percent for at least another two years.
But when the time comes to act, the probable outcome is clear. Asked for the direction of the next move, 65 percent said they see a hike.