James Knightley, Senior Economist at ING, comments that with the BoE already warning of upside risks to medium-term inflation, we suspect there will be a relatively hawkish tone in next week’s BoE’s inflation report.
Key Quotes
“The Bank of England left monetary policy unchanged yesterday with Bank Rate kept at 0.5% and the size of the Asset Purchase Facility remaining £375bn.”
“The vote was likely 9-0 given that both Martin Weale and Ian McCafferty switched back to voting for nochange at the January MPC meeting.”
“The minutes said that “they noted the risk that low inflation might persist for longer than the temporary factors implied and concluded that this risk would be increased by an increase in Bank Rate at the current juncture”.”
“Attention now switches to next week’s Inflation Report which will provide new economic forecasts. The minutes to the January MPC meeting have already hinted that the report could be a little more hawkish despite the strong possibility of a negative headline CPI reading in the next couple of months.”
“The key line was that “risks to CPI inflation in the medium term might have, if anything, shifted to the upside”.”
“Consequently, there is the possibility that inflation is predicted to be above the 2% target in 2 years’ time based on current market interest rates. Such a development would offer support to our view that the BoE will hike rates before the end of the year.”
Key Quotes
“The Bank of England left monetary policy unchanged yesterday with Bank Rate kept at 0.5% and the size of the Asset Purchase Facility remaining £375bn.”
“The vote was likely 9-0 given that both Martin Weale and Ian McCafferty switched back to voting for nochange at the January MPC meeting.”
“The minutes said that “they noted the risk that low inflation might persist for longer than the temporary factors implied and concluded that this risk would be increased by an increase in Bank Rate at the current juncture”.”
“Attention now switches to next week’s Inflation Report which will provide new economic forecasts. The minutes to the January MPC meeting have already hinted that the report could be a little more hawkish despite the strong possibility of a negative headline CPI reading in the next couple of months.”
“The key line was that “risks to CPI inflation in the medium term might have, if anything, shifted to the upside”.”
“Consequently, there is the possibility that inflation is predicted to be above the 2% target in 2 years’ time based on current market interest rates. Such a development would offer support to our view that the BoE will hike rates before the end of the year.”
