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3 Aug 2015
BoE preview: Contentment with market’s more hawkish pricing – Nomura
FXStreet (Mumbai) - Analysts at Nomura explains the new release schedule for the Bank of England to be employed first time this week along with the expectations from the inflation report and the minutes.
Key Quotes:
“On 6 August, the BoE’s new release schedule will be employed for the first time. This means the decision will be accompanied by minutes to the meeting and the Bank’s quarterly Inflation Report will be published simultaneously.”
“We will be watching the vote count for the decision as dissents are likely, and looking for the MPC’s inflation forecast at the policy relevant horizons of two and three years.”
“A surprise in the latter would probably be needed for us to reassess the balance of risks to our February 2016 forecast for the first rate hike.“
“Meanwhile, a surprise in the number of dissenters may only provide news on the hawkishness of the hawks, rather than the core committee members who will ultimately trigger the start of the hiking cycle. Markets will likely react to a surprise in either though.”
“Since the May Inflation Report, economic data has on average come close to the BoE’s expectations, albeit subject to some risks and judgement.”
“If the BoE’s view of revisions for that quarter is unchanged, this would thus be a hawkish surprise, but we doubt this will be a big factor.“
“Most pertinent will probably be the surprise rise in the unemployment rate, even though this was mostly caused by statistical cohort effects rather than real economic ones (see UK labour market’s rate disappointment).”
“In any case, it is what demand is doing relative to supply that the BoE cares about and the pay data are a good but lagging indicator of that.”
Key Quotes:
“On 6 August, the BoE’s new release schedule will be employed for the first time. This means the decision will be accompanied by minutes to the meeting and the Bank’s quarterly Inflation Report will be published simultaneously.”
“We will be watching the vote count for the decision as dissents are likely, and looking for the MPC’s inflation forecast at the policy relevant horizons of two and three years.”
“A surprise in the latter would probably be needed for us to reassess the balance of risks to our February 2016 forecast for the first rate hike.“
“Meanwhile, a surprise in the number of dissenters may only provide news on the hawkishness of the hawks, rather than the core committee members who will ultimately trigger the start of the hiking cycle. Markets will likely react to a surprise in either though.”
“Since the May Inflation Report, economic data has on average come close to the BoE’s expectations, albeit subject to some risks and judgement.”
“If the BoE’s view of revisions for that quarter is unchanged, this would thus be a hawkish surprise, but we doubt this will be a big factor.“
“Most pertinent will probably be the surprise rise in the unemployment rate, even though this was mostly caused by statistical cohort effects rather than real economic ones (see UK labour market’s rate disappointment).”
“In any case, it is what demand is doing relative to supply that the BoE cares about and the pay data are a good but lagging indicator of that.”