12 Feb 2015
Pragmatic BOE postures next move in rates is up – ANZ
FXStreet (Barcelona) - Brian Martin of ANZ, comments on the inflation and easing expectations for UK whilst reviewing the BOE’s inflation report.
Key Quotes
“The Bank of England (BoE) expects inflation to fall further, possibly into negative territory in coming months and hover around zero for much of this year, but the central bank is looking through this volatility: “… as unusual as that is, it arguably isn’t the main story. The headlines today mask stronger underlying dynamics which will determine UK output and inflation tomorrow”.”
“..whilst the tone of the report was more upbeat than the market had anticipated, it did contain the usual caveats and the BoE is in no rush to raise interest rates.”
“The risks to the forecasts remain balanced and the inflation target is symmetric. The BoE cares as much about inflation below target as above target.”
““With inflation below target and unemployment above its long-run sustainable rate, there is no immediate trade-off between returning inflation to target and supporting economic activity. In fact, to return inflation to target it is necessary to eliminate the remaining degree of economic slack,” Carney said before qualifying during the press conference that returning inflation to target would probably require a gentle and gradual rise in interest rates”
“Acknowledging the pragmatic nature of monetary policy, Carney did state that the BoE is vigilant to the risks that disappointing global growth and evidence that persistently low inflation could negatively impact on inflation expectations. Were those risks to materialise, it could require additional stimulus.”
“The BoE can therefore respond in either direction, but the inflation report states that “under the central case, the MPC judges it more likely than not that Bank Rate will increase over the forecast period”.”
Key Quotes
“The Bank of England (BoE) expects inflation to fall further, possibly into negative territory in coming months and hover around zero for much of this year, but the central bank is looking through this volatility: “… as unusual as that is, it arguably isn’t the main story. The headlines today mask stronger underlying dynamics which will determine UK output and inflation tomorrow”.”
“..whilst the tone of the report was more upbeat than the market had anticipated, it did contain the usual caveats and the BoE is in no rush to raise interest rates.”
“The risks to the forecasts remain balanced and the inflation target is symmetric. The BoE cares as much about inflation below target as above target.”
““With inflation below target and unemployment above its long-run sustainable rate, there is no immediate trade-off between returning inflation to target and supporting economic activity. In fact, to return inflation to target it is necessary to eliminate the remaining degree of economic slack,” Carney said before qualifying during the press conference that returning inflation to target would probably require a gentle and gradual rise in interest rates”
“Acknowledging the pragmatic nature of monetary policy, Carney did state that the BoE is vigilant to the risks that disappointing global growth and evidence that persistently low inflation could negatively impact on inflation expectations. Were those risks to materialise, it could require additional stimulus.”
“The BoE can therefore respond in either direction, but the inflation report states that “under the central case, the MPC judges it more likely than not that Bank Rate will increase over the forecast period”.”