13 Feb 2014
Flash: BoE Carney faces the same dilemma as US peers - Danske Bank
FXStreet (Barcelona) - Kasper Kirkegaard, Chief Analyst at Danske Bank notes that in the UK, Bank of England governor Mark Carney is facing the same dilemma as his colleagues in the US of trying to convince the public that interest rate hikes are not pending even as the economic recovery matures – while at the same time maintaining some flexibility in monetary policy.
Key Quotes
“With the unemployment rate expected to reach the 7% threshold already during spring this is no easy job. The BoE, as expected, did not lower the unemployment threshold, but introduced what it calls the ‘the next phase of guidance’.”
“Markets were not impressed, however, and the hawkish re-pricing of rate markets suggests that investors are sceptical that this more qualitative guidance can keep money market rates low as the economy recovers further."
"The timing of the first rate hike derived from the SONIA forward curve was brought forward by three months (to Feb-15) and GBP strengthened by about 1%.”
Key Quotes
“With the unemployment rate expected to reach the 7% threshold already during spring this is no easy job. The BoE, as expected, did not lower the unemployment threshold, but introduced what it calls the ‘the next phase of guidance’.”
“Markets were not impressed, however, and the hawkish re-pricing of rate markets suggests that investors are sceptical that this more qualitative guidance can keep money market rates low as the economy recovers further."
"The timing of the first rate hike derived from the SONIA forward curve was brought forward by three months (to Feb-15) and GBP strengthened by about 1%.”