8 Apr 2015
Weak Stelring positive for UK inflation - BTMU
FXStreet (Guatemala) - Analysts at Bank of america Merrill Lynch noted the conditions of UK's inflation performance.
Key Quotes:
"We can think of few things less fashionable than being concerned about inflation at the moment and, in our view, the UK is no exception, given inflation touched zero in February (with every possibility we see negative prints soon)."
"However, if we take the UK experience over the last seven years in broad sweep - i.e., since the 1Q08 pre-crisis peak in GDP - average CPI inflation has been 2.6%, compared to 1.5% in the US and 1.3% in the Eurozone. "
"Yes, sterling is lower by 16%, if we are generous and start from the top of the January 2007 spike, making a positive contribution to inflation, but oil is almost a third cheaper since early 2008, so has been a significant disinflationary offset. One would be hard-pressed to identify the scars of the Great Recession in the UK's inflation performance alone."
"While it is possible that the lags of the recessionary response are simply very long, we believe it is also possible that an inflation rate that proved stubbornly high for most of the recession bounces back to more normal levels relatively quickly. More quickly, at least, than is currently being priced into the front end of the inflation curve."
Key Quotes:
"We can think of few things less fashionable than being concerned about inflation at the moment and, in our view, the UK is no exception, given inflation touched zero in February (with every possibility we see negative prints soon)."
"However, if we take the UK experience over the last seven years in broad sweep - i.e., since the 1Q08 pre-crisis peak in GDP - average CPI inflation has been 2.6%, compared to 1.5% in the US and 1.3% in the Eurozone. "
"Yes, sterling is lower by 16%, if we are generous and start from the top of the January 2007 spike, making a positive contribution to inflation, but oil is almost a third cheaper since early 2008, so has been a significant disinflationary offset. One would be hard-pressed to identify the scars of the Great Recession in the UK's inflation performance alone."
"While it is possible that the lags of the recessionary response are simply very long, we believe it is also possible that an inflation rate that proved stubbornly high for most of the recession bounces back to more normal levels relatively quickly. More quickly, at least, than is currently being priced into the front end of the inflation curve."