11 Feb 2015
BoE could hike rates by year-end – Investec
FXStreet (Edinburgh) - The start of the hiking cycle in the UK could start as soon as Q4 2015, according to D.Theodosiou at Investec.
Key Quotes
“Although subject to varied interpretation, interest rate markets point to the first interest rate hike in the UK being priced in for Q2 2016, with a second priced in Q4 2016”.
“Part of this expectation has likely been skewed by ‘safe haven’ flows, with many countries charging negative yields on deposits and investors looking for safe places to invest, particularly in light of recent Greek events”.
“Therefore, if the MPC continue to hold the line that medium term inflation goals remain on target, the market could find itself scrambling to adjust expectations more in-line with the Investec Economics team, that are currently looking for a November 2015 first rate rise”.
“This would certainly help Sterling trade stronger across the board with investors factoring in higher future yield for holding Pounds. The only question is, if investors sell Gilts (UK Bonds) to price in an earlier rate rise in the UK, then where do they invest instead?”.
Key Quotes
“Although subject to varied interpretation, interest rate markets point to the first interest rate hike in the UK being priced in for Q2 2016, with a second priced in Q4 2016”.
“Part of this expectation has likely been skewed by ‘safe haven’ flows, with many countries charging negative yields on deposits and investors looking for safe places to invest, particularly in light of recent Greek events”.
“Therefore, if the MPC continue to hold the line that medium term inflation goals remain on target, the market could find itself scrambling to adjust expectations more in-line with the Investec Economics team, that are currently looking for a November 2015 first rate rise”.
“This would certainly help Sterling trade stronger across the board with investors factoring in higher future yield for holding Pounds. The only question is, if investors sell Gilts (UK Bonds) to price in an earlier rate rise in the UK, then where do they invest instead?”.