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8 May 2015
BoE rate hike expected in May 2016 – Rabobank
FXStreet (Barcelona) - The Rabobank Team pushes their BoE rate hike forecast ahead to May 2016, expecting UK inflation to stay longer below the 2% target of the central bank.
Key Quotes
“Over the last month or so UK activity data have been mixed. The halving of UK GDP growth to 0.3% q/q in Q1 has been followed by disappointments from April manufacturing and construction sector PMI but by a reassuringly strong services sector PMI. Together these data suggest that the recovery remain in place so far in Q2, though concerns remain about the sustainability of growth and level of investment outside the dominant services sector.“
“News of a Conservative majority government may provide a boost to business confidence, but going forward this will be clouded by fears about the impact on growth from fiscal austerity and from a referendum about EU membership.”
“UK inflation remains very subdued with the CPI rate recording a flat y/y reading for the second consecutive month in March. Perhaps more worryingly, core CPI inflation has dropped to just 1.0% y/y.”
“Inflation expectations have stabilized, albeit at lower levels, but with earnings growing at a slack pace and further austerity in sight it may be some time before UK CPI inflation returns to the BoE’s 2% target. Against this backdrop we have pushed back our forecast for the first BoE rate hike of the cycle to May 2016 from February 2016.”
Key Quotes
“Over the last month or so UK activity data have been mixed. The halving of UK GDP growth to 0.3% q/q in Q1 has been followed by disappointments from April manufacturing and construction sector PMI but by a reassuringly strong services sector PMI. Together these data suggest that the recovery remain in place so far in Q2, though concerns remain about the sustainability of growth and level of investment outside the dominant services sector.“
“News of a Conservative majority government may provide a boost to business confidence, but going forward this will be clouded by fears about the impact on growth from fiscal austerity and from a referendum about EU membership.”
“UK inflation remains very subdued with the CPI rate recording a flat y/y reading for the second consecutive month in March. Perhaps more worryingly, core CPI inflation has dropped to just 1.0% y/y.”
“Inflation expectations have stabilized, albeit at lower levels, but with earnings growing at a slack pace and further austerity in sight it may be some time before UK CPI inflation returns to the BoE’s 2% target. Against this backdrop we have pushed back our forecast for the first BoE rate hike of the cycle to May 2016 from February 2016.”