BoE could hike in early 2017 – Rabobank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 4, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Edinburgh) - Strategists at Rabobank see the Bank of England hiking rates during the early months of 2017.

    Key Quotes

    “The money market is not fully priced for a BoE rate hike until early 2017”.

    “The latest Reuters survey of economists, however, has a consensus of Q2 2016 for the first move, ahead of our forecast of August 2016”.

    “The most hawkish of economists’ views appears to be focused on the increase in wage inflation in the UK and on the assumption that this will breed broad based price pressures”.

    “We would argue that the impetus coming from the labour market may be leveling off and that continued weakness in commodity prices should also continue to limit the potential for a recovery in headline inflation”.

    “Additionally, sterling strength should place a cap on imported price pressures. On the assumption that the ECB steps up its monetary stimulus as we expect in December, the downside pressure on the EUR could export disinflationary pressures in the UK economy via the exchange rate, suggesting the potential for lower for longer UK interest rates”.

    “Unless UK inflation starts to rise more aggressively than expected, it seems unlikely that the BoE will be in a position to hike rates ahead of the Federal Reserve given the dovish policy settings of the ECB”.
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