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BoE first move on rates seen only towards the end of the year – Commerzbank


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FXStreet (Córdoba) – There will be no change to the MPC’s monetary stance at next week’s “Super Thursday” meeting but there will be some interest surrounding the voting stance of Ian McCafferty, the Committee’s only dissenter, who has been voting for a 25 bps increase since August, according to Peter Dixon, analyst at Commerzbank.

Key Quotes


“The message from Mark Carney is that wage costs are not picking up sufficiently to justify policy action in the near term, undermining Mr McCafferty’s position which has been based on fears of rising labour costs.”


“The BoE continues to express concern that productivity growth remains weak, with MPC member Kristin Forbes indicating that the Q4 figures could be ‘abysmal’.”


“However, weak price inflation will take some of the heat out of wage growth and prevent wage and productivity figures from moving too far out of line in the near-term. Accordingly, the majority view of no change will prevail for some months to come, and we continue to look for the first move on rates only towards the end of the year”.


“The other item on the agenda next week will be the release of the Inflation Report which will give the BoE the opportunity to update its economic forecast. It is possible that the 2016 GDP growth and inflation forecasts will be shaded down modestly although this is unlikely to materially affect the bank’s thinking.”