Strategists at Rabobank see the Bank of England hiking rates during the early
months of 2017.
Key Quotes
“The money market is
not fully priced for a BoE rate hike until early
2017”.
“The latest Reuters survey of economists, however, has a consensus
of Q2 2016 for the first move, ahead of our forecast of August
2016”.
“The most hawkish of economists’ views appears to be focused on
the increase in wage inflation in the UK and on the assumption that this will
breed broad based price pressures”.
“We would argue that the impetus
coming from the labour market may be leveling off and that continued weakness in
commodity prices should also continue to limit the potential for a recovery in
headline inflation”.
“Additionally, sterling strength should place a cap
on imported price pressures. On the assumption that the ECB steps up its
monetary stimulus as we expect in December, the downside pressure on the EUR
could export disinflationary pressures in the UK economy via the exchange rate,
suggesting the potential for lower for longer UK interest rates”.
“Unless
UK inflation starts to rise more aggressively than expected, it seems unlikely
that the BoE will be in a position to hike rates ahead of the Federal Reserve
given the dovish policy settings of the ECB”.
