The Bank of England has indicated that the pace of interest rate increases could accelerate if the economy remains on its current track. You have to wonder what the eminent experts on the MPC drink in their tea to be so off course about the current track of the UK economy.
Bank of England
James Alexander | Not quite the line you will see across most of the market or amongst so-called monetarist economists. In fact, implied by actual nominal growth and expectations for nominal growth monetary policy is too tight. Nominal GDP growth is running at 3.7% YoY and falling, while the best measure of inflation around, the implied GDP deflator is running just below 2%.
James Alexander via Historinhas | In a “currency war” it pays to be the loser. If you need an expansionary monetary policy, like most currency blocs today, don’t let anyone undercut with dirty devaluations. So, when a big baby like China decides to lower the value of its currency versus the biggest baby of all, the USD, make sure you are not caught in the cross fire.
James Alexander via Historinhas | The Bank of England published its quarterly Inflation Report for November 2015 last week. The fact that the BoE is missing its 2% inflation target by more than 1% set in train the usual mini-flurry of letters to and from their political masters at the UK finance ministry, aka The Treasury. While reading the Treasury reply I spotted that there had been an “evolution in UK monetary policy”, I was forced to read on.
UBS | The announcement of the policy decision at midday on Thursday will also include the minutes to the meeting, alongside the publication and press conference for the August Inflation Report. This will make for more transparency, but will mean a lot of information for the market to digest in one go.
The Corner | February 28, 2015 | The fall in oil prices may yet push the Bank of England to raise rates, which it has been keeping at 0.5% since March 2009. It currently owns the equivalent of 25% of UK’s nominal GDP (see graph above).
MADRID | By J. J. Figares (LINK) | On Wednesday, the minutes of the last meeting of the Monetary Policy Committee of the Bank of England (BoE) were published. Although 9 of its members voted to retain unchanged its program of asset purchases in secondary markets, 2 of them, Ian McCafferty and Martin Weal, they voted against the proposal to keep interest rates reference at the current level of 0.5% and advocated to increase them by a quarter percentage point.
Berlin | By Alberto Lozano | Mario Draghi is speaking today again. Although no decisions or changes in the ECB’s monetary policy are expected, markets expect to know the ECB president’s assessment of the latest economic and financial developments.
MADRID | The Corner | UK Consumer Prices Index (CPI) grew by 1.9% in the year to June 2014, up from 1.5% in May, according to official data released on Tuesday, almost reaching the Bank of England’s 2% target and strenghtening the case for a rise in interest rates which have been held at a record low of 0.5%.
MADRID | By Bankinter analysts | According to Rightmove, housing prices in the UK rose by +0.1% m/m in June versus previous +3.6%. Thus, the year-on-year rate slows down to 7.7% from 8.9%. In such context, Bank of England’s minutes will be particularly relevant this week, especially after Mr Carney said that the rise in interest rates will come sooner than markets expect.