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7 Aug 2014
BoE on hold on muted wages and uncertain amount of slack in labor market - ING
FXStreet (Łódź) - James Knightley from ING suggests that the BoE was content to leave policy unchanged at the August meeting despite satisfactory UK GDP growth, due to the fact that at the same time wages remain muted and the amount of slack in labor market is still uncertain.
Key quotes
"We would expect to see one, possibly two members of the MPC having voted for a rate hike at today’s meeting, but we won’t find that out until the minutes are released on August 20."
"Given we don’t expect any significant loss of momentum for the UK economy over the rest of the year we favour a November rate hike from the BoE with very slow and steady additional tightening of perhaps 25bp per quarter thereafter."
"Indeed, we have to remember the comments from the June BoE minutes stating that they were surprised about the low probability the market was attaching to a rate rise before year-end."
"The risks to this view are that sterling strengthens more aggressively than we anticipate, which is also linked to the potential for a weaker Eurozone backdrop and a vote in favour of Scottish independence, which would likely lead to market volatility and economic uncertainty. "
Key quotes
"We would expect to see one, possibly two members of the MPC having voted for a rate hike at today’s meeting, but we won’t find that out until the minutes are released on August 20."
"Given we don’t expect any significant loss of momentum for the UK economy over the rest of the year we favour a November rate hike from the BoE with very slow and steady additional tightening of perhaps 25bp per quarter thereafter."
"Indeed, we have to remember the comments from the June BoE minutes stating that they were surprised about the low probability the market was attaching to a rate rise before year-end."
"The risks to this view are that sterling strengthens more aggressively than we anticipate, which is also linked to the potential for a weaker Eurozone backdrop and a vote in favour of Scottish independence, which would likely lead to market volatility and economic uncertainty. "