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7 Nov 2014
BoE Inflation Report to signal no rate rise until August 2015 - RBS
FXStreet (Łódź) - Ross Walker, Analyst at RBS, believes that the BoE November Inflation Report to be published next week, will further confirm expectations for the first rate hike coming in mid-2015.
Key quotes
"Inflation Report projections are, first and foremost, a policy signalling device – certainly at the 2-3 year forecast horizon. As much as City economists bemoan perceived inconsistencies in the minutiae of the MPC's forecasts, this is to miss the main point of the exercise."
"Hence, whilst medium-term (2-3 years out) considerations might warrant policymaker efforts to temper some of the dovish moves in financial markets, in practice the immediate fire-fighting exercise is to guard against further contagion from the euro area and avoid any overly pre-emptive moves to constrain domestic demand (the risks are that anaemic wage data achieve this independently)."
"Given how tricky it can be for central banks to nuance their policy communication – a little bit looser now, a little bit tighter later – we suspect the Bank will be content for the November forecasts to broadly validate current market pricing (the Mansion House speech back in June is a timely reminder of the BoE's ability to move the markets in a more hawkish direction as and when required)."
Key quotes
"Inflation Report projections are, first and foremost, a policy signalling device – certainly at the 2-3 year forecast horizon. As much as City economists bemoan perceived inconsistencies in the minutiae of the MPC's forecasts, this is to miss the main point of the exercise."
"Hence, whilst medium-term (2-3 years out) considerations might warrant policymaker efforts to temper some of the dovish moves in financial markets, in practice the immediate fire-fighting exercise is to guard against further contagion from the euro area and avoid any overly pre-emptive moves to constrain domestic demand (the risks are that anaemic wage data achieve this independently)."
"Given how tricky it can be for central banks to nuance their policy communication – a little bit looser now, a little bit tighter later – we suspect the Bank will be content for the November forecasts to broadly validate current market pricing (the Mansion House speech back in June is a timely reminder of the BoE's ability to move the markets in a more hawkish direction as and when required)."