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4 Dec 2014
BoE leaves policy unchanged – ING
FXStreet (Barcelona) - James Knightley of ING notes that BoE has left the rates unchanged at 0.5%, and anticipates disinflationary pressure to reverse through 2015.
Key Quotes
“The Bank of England has left monetary policy unchanged with Bank Rate kept at 0.5% and the size of the Asset Purchase Facility maintained at £375bn.”
“However, given BoE Governor Mark Carney’s suspicion that he will have to write a letter explaining to the Chancellor why the BoE has missed the inflation target to the downside (CPI may drop below 1% in January on lower food and fuel costs), the rest of the committee are likely to have felt they had time to wait.”
“That said, we continue to see the risk of earlier policy tightening than the market does. We anticipate that oil prices will gradually rise through 2015 based on improving global growth and a reduction in the level of oil over-supply. We also expect wages to increase – the national minimum wage has just risen by 3%, pay deal data is picking up and labour market turnover is rising.”
“Consequently, disinflationary pressures look set to reverse through the course of 2015 and we expect CPI to rise back above the 2% target in early 2016. Given that the BoE targets inflation 2 years ahead, we expect to see very gradual interest rates rises next year, most probably from 2Q15 onwards – soon after the May 7 General Election.”
Key Quotes
“The Bank of England has left monetary policy unchanged with Bank Rate kept at 0.5% and the size of the Asset Purchase Facility maintained at £375bn.”
“However, given BoE Governor Mark Carney’s suspicion that he will have to write a letter explaining to the Chancellor why the BoE has missed the inflation target to the downside (CPI may drop below 1% in January on lower food and fuel costs), the rest of the committee are likely to have felt they had time to wait.”
“That said, we continue to see the risk of earlier policy tightening than the market does. We anticipate that oil prices will gradually rise through 2015 based on improving global growth and a reduction in the level of oil over-supply. We also expect wages to increase – the national minimum wage has just risen by 3%, pay deal data is picking up and labour market turnover is rising.”
“Consequently, disinflationary pressures look set to reverse through the course of 2015 and we expect CPI to rise back above the 2% target in early 2016. Given that the BoE targets inflation 2 years ahead, we expect to see very gradual interest rates rises next year, most probably from 2Q15 onwards – soon after the May 7 General Election.”