8 Aug 2013
Flash: BoE guidance starts with a 7% unemployment rate - BAML
FXstreet.com (Barcelona) - Research teams at BofA Merrill Lynch note the 7% unemployment rate…with various “knockout” clauses.
Key Quotes:
"The BoE’s long-awaited forward guidance delivered a range of guideposts and criteria for raising interest rates. The most important was an unemployment rate of 7% being a key point for them to actively consider raising rates (but not an automatic trigger). However, that threshold came with various “knockout” clauses;
1. If CPI inflation 18-24 months ahead was expected to be above 2.5%
2. Medium-term inflation expectations remained sufficiently well anchored
3. The BoE’s Financial Policy Committee (FPC) judged that the stance of monetary policy did not pose a significant threat to financial stability".
"And the BoE’s ultimate target is still 2% CPI inflation".
Key Quotes:
"The BoE’s long-awaited forward guidance delivered a range of guideposts and criteria for raising interest rates. The most important was an unemployment rate of 7% being a key point for them to actively consider raising rates (but not an automatic trigger). However, that threshold came with various “knockout” clauses;
1. If CPI inflation 18-24 months ahead was expected to be above 2.5%
2. Medium-term inflation expectations remained sufficiently well anchored
3. The BoE’s Financial Policy Committee (FPC) judged that the stance of monetary policy did not pose a significant threat to financial stability".
"And the BoE’s ultimate target is still 2% CPI inflation".