14 Nov 2013
Flash: BoE throws in the towel - Nomura
FXstreet.com (Barcelona) - In its November Inflation Report, the Bank of England delivered a more hawkish forecast than Nomura Economist Philip Rush had expected.
Key Quotes
Moves in the BoE‟s unemployment rate forecast are what make the revisions hawkish on the whole. We had expected the BoE to bring forward the point that the 7% threshold was breached by six months, which was probably the modal market expectation, albeit with some skew to a less aggressive change."
"In the event, it pulled that point forward by over a year. On market rates, that means the BoE expects 7% to most likely be reached in late 2015. But assuming no changes in policy, 7% occurs in Q4 2014, which is similar to our forecast. That is a particularly stark change in the balance of risks."
"There is rapid convergence toward an earlier hike implied by this. This can feed market expectations that the BoE will be hiking by early 2015, it‟s just the MPC doesn‟t know it yet."
Key Quotes
Moves in the BoE‟s unemployment rate forecast are what make the revisions hawkish on the whole. We had expected the BoE to bring forward the point that the 7% threshold was breached by six months, which was probably the modal market expectation, albeit with some skew to a less aggressive change."
"In the event, it pulled that point forward by over a year. On market rates, that means the BoE expects 7% to most likely be reached in late 2015. But assuming no changes in policy, 7% occurs in Q4 2014, which is similar to our forecast. That is a particularly stark change in the balance of risks."
"There is rapid convergence toward an earlier hike implied by this. This can feed market expectations that the BoE will be hiking by early 2015, it‟s just the MPC doesn‟t know it yet."