12 Feb 2014
Flash: BoE risk of a hike bought forward, GBP bid - RBS
FXStreet (Guatemala) - Strategists at The Royal Bank of Scotland analysed the Inflation Report from the MPC/BoE and have shifted on their expectations of a hike to come in as soon as Q2 2015.
Key Quotes:
“The February 2014 Inflation Report heralded a heavily revised policy guidance framework. Governor Carney presented this as a new 'phase' of policy. In our view, it is more of a reversion and we would go as far as to argue that 'explicit' forward guidance has been abandoned”.
“The MPC appears to have reverted to a form of implicit forward guidance, albeit backed up by greater numerical detail in terms of the MPC's forecasts and conditioning assumptions (this is welcome, but it also tends to dilute the Bank's policy signalling)”.
“Overall, the immediate market reaction (slightly higher front-end rates, a rise in sterling) looks justified: There is less explicit forward guidance on monetary policy. Still, the BoE's general rhetoric around the economic outlook seems barely altered (ie, cautious/dovish) and the key economic variable for monetary policy – the CPI inflation projection – is marginally lower”.
“On balance, the risks around our forecast for the first Bank Rate hike in Q3 2015 have shifted towards an earlier rise (ie, Q2 2015)”.
Key Quotes:
“The February 2014 Inflation Report heralded a heavily revised policy guidance framework. Governor Carney presented this as a new 'phase' of policy. In our view, it is more of a reversion and we would go as far as to argue that 'explicit' forward guidance has been abandoned”.
“The MPC appears to have reverted to a form of implicit forward guidance, albeit backed up by greater numerical detail in terms of the MPC's forecasts and conditioning assumptions (this is welcome, but it also tends to dilute the Bank's policy signalling)”.
“Overall, the immediate market reaction (slightly higher front-end rates, a rise in sterling) looks justified: There is less explicit forward guidance on monetary policy. Still, the BoE's general rhetoric around the economic outlook seems barely altered (ie, cautious/dovish) and the key economic variable for monetary policy – the CPI inflation projection – is marginally lower”.
“On balance, the risks around our forecast for the first Bank Rate hike in Q3 2015 have shifted towards an earlier rise (ie, Q2 2015)”.