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Carney to elaborate on BoE policy stance at today’s inflation report hearing

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 24, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Mumbai) - In today’s UK’s inflation report hearing the Treasury Select Committee will question the Bank of England governor Mark Carney to get more insight into the central banks current policy stance. The inflation report hearing comes at a time when the BoE can be seen shifting the rate hike decision to a later date.

    Carney is confident of a growing consumer inflation expectations as well as rise in disposable income. If that is really the case then why does the central bank think it is wise to postpone rate hike? One reason could be that Carney wishes to support economy at a juncture when growth is just appearing to pick up. It’s likely that Carney will be asked to elaborate on the central bank’s decision to push its decision to raise rates further.

    British annual consumer prices declined 0.1 per cent in October from a year earlier reflecting weaker global commodity costs. The CPI has remained in the negative territory for a second month in a row, way below the BoE’s 2 per cent inflation target. For the first time, in October consumer prices fell for two months in a row on an annual basis.

    The central bank has agreed that around four fifths of the shortfall in inflation is primarily due to lower oil prices and a strengthening in sterling. Sterling's strength when pitted against other major currencies has put downward pressure on prices as well. It forces UK exporters to keep prices low just so that it can continue to remain competitive. This further adds to downward inflation. Low global commodity prices have also contributed to the slide in CPI.
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