Back
6 Jan 2015
MPC might keep rates on hold with UK CPI set to fall – BAML
FXStreet (Barcelona) - Strategists at Bank of America-Merrill Lynch, expect UK’s CPI to fall around 0.7% yoy, in this view they anticipate the MPC to keep rates on hold.
Key Quotes
“It has been an inauspicious start to the year for the GBP, particularly versus the USD as UK-US rate differentials move against the sterling. The near-term outlook thus appears to be challenging as inflation continues to disappoint and as investors look ahead to the UK general election.”
“We think the decision to keep rates on hold for the majority of the Monetary Policy Committee should be a relatively easy one this time around and indeed over the coming months, against the backdrop of a softening in near-term inflationary pressures.”
“In our view, CPI inflation is set to fall further in the near term and will give the majority of the MPC greater control on the debate on the timing of the first rate hike.”
“The December CPI, due for release on 13 January, is expected to show CPI inflation falling to around 0.7% yoy. This would trigger an open letter from BoE Governor Mark Carney to the Chancellor on the reasons why inflation is printed below 1% from the 2% target.”
“Inflation is likely to trough around 0.5% early this year and this is notably below the BoE’s expectations of a trough of around 1% in its November Inflation Report given the continued pressure on global energy prices. Clearly, that gives the bulk of the MPC an easier backdrop to leave rates on hold.”
Key Quotes
“It has been an inauspicious start to the year for the GBP, particularly versus the USD as UK-US rate differentials move against the sterling. The near-term outlook thus appears to be challenging as inflation continues to disappoint and as investors look ahead to the UK general election.”
“We think the decision to keep rates on hold for the majority of the Monetary Policy Committee should be a relatively easy one this time around and indeed over the coming months, against the backdrop of a softening in near-term inflationary pressures.”
“In our view, CPI inflation is set to fall further in the near term and will give the majority of the MPC greater control on the debate on the timing of the first rate hike.”
“The December CPI, due for release on 13 January, is expected to show CPI inflation falling to around 0.7% yoy. This would trigger an open letter from BoE Governor Mark Carney to the Chancellor on the reasons why inflation is printed below 1% from the 2% target.”
“Inflation is likely to trough around 0.5% early this year and this is notably below the BoE’s expectations of a trough of around 1% in its November Inflation Report given the continued pressure on global energy prices. Clearly, that gives the bulk of the MPC an easier backdrop to leave rates on hold.”