12 Jun 2015
UK: Near-term prospect of a rate hike diminished – ING
FXStreet (Barcelona) - James Knightley, Senior Economist at ING, explains that the inflation outlook remains supportive for a rate hike by the Bank of England in Q1 16.
Key Quotes
“In terms of the outlook for interest rates, we have pushed back the timing of the first move to 1Q16. This reflects the strength of sterling, which is likely to mean that inflation will take longer to rise back towards target levels. Nonetheless, inflationary pressures are likely to build up in the economy, most notably in the labour market. It is just that with headline inflation unlikely to break back above 1% until the very end of the year, when the oil-price plunge drops out of the annual comparison, the Bank of England is likely to have presentational difficulties in justifying a rate rise in 4Q15.”
Key Quotes
“In terms of the outlook for interest rates, we have pushed back the timing of the first move to 1Q16. This reflects the strength of sterling, which is likely to mean that inflation will take longer to rise back towards target levels. Nonetheless, inflationary pressures are likely to build up in the economy, most notably in the labour market. It is just that with headline inflation unlikely to break back above 1% until the very end of the year, when the oil-price plunge drops out of the annual comparison, the Bank of England is likely to have presentational difficulties in justifying a rate rise in 4Q15.”