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13 Nov 2014
BoE doves consolidate roost internally – Nomura
FXStreet (Barcelona) - Philip Rush, Research Analyst at Nomura sees the likelihood of inflation falling below 1% over the next several months as giving the dovish majority enough excuse not to hike rates soon.
Key Quotes
“The BoE’s November Inflation Report forecasts have risks broadly balanced around the inflation target in the medium term, assuming it hikes in line with market rates, thus supporting those priced expectations. This was more dovish than we expected, because the underlying disinflation over that horizon was assumed to be larger. We see the likelihood of inflation falling below 1.0% over the next several months as giving the dovish majority enough excuse not to hike soon, despite the state of the economy demanding it, in our view. The dovish message is broadly consistent with our recently revised forecast for the first rate hike to be delayed to August 2015, from February.”
“Because of the absence of spare capacity in our forecast for August 2015, when we see the first rate hike, there is likely to be more compelling domestic inflationary pressures that push the MPC to the exit. We hope the economy and markets have not been bent into such poor shape by inappropriately loose monetary policy in the interim that hikes arent possible.”
Key Quotes
“The BoE’s November Inflation Report forecasts have risks broadly balanced around the inflation target in the medium term, assuming it hikes in line with market rates, thus supporting those priced expectations. This was more dovish than we expected, because the underlying disinflation over that horizon was assumed to be larger. We see the likelihood of inflation falling below 1.0% over the next several months as giving the dovish majority enough excuse not to hike soon, despite the state of the economy demanding it, in our view. The dovish message is broadly consistent with our recently revised forecast for the first rate hike to be delayed to August 2015, from February.”
“Because of the absence of spare capacity in our forecast for August 2015, when we see the first rate hike, there is likely to be more compelling domestic inflationary pressures that push the MPC to the exit. We hope the economy and markets have not been bent into such poor shape by inappropriately loose monetary policy in the interim that hikes arent possible.”