24 Jun 2015
BoE to hike rates by YE? - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that while it appears that the voting pattern of the MPC is set to split again soon, it could still be some time before there is a majority vote in favour of a rate hike.
Key quotes:
"Nevertheless, the strength of the recently released wage data combined with recent hawkish remarks from Forbes and now Weale has reignited market speculation that the MPC could be willing to hike interest rates by the end of this year."
"The release of April weekly earnings data reported a better than expected 2.7% 3m y/y rise. This was the strongest increases since early 2009 and tallies with an IDS survey which has suggested that despite pay freezes in some industries that almost 90% of Q1 UK pay awards were in the region of 2 to 3.99%."
"Higher wage deals raise the likelihood of demand led inflation re-appearing and Weale could argue that a rate hike in the coming months could be necessary to prevent CPI inflation pushing above its 2% target in the medium-term. That said, a number of counter arguments remain."
"The first is centred on the persistent weakness of productivity in the UK labour force. Without a rise in productivity, it is likely that pay increases will naturally be capped. The second lies with the uncertainties connected with the budget and the impact of fresh austerity on growth."
Key quotes:
"Nevertheless, the strength of the recently released wage data combined with recent hawkish remarks from Forbes and now Weale has reignited market speculation that the MPC could be willing to hike interest rates by the end of this year."
"The release of April weekly earnings data reported a better than expected 2.7% 3m y/y rise. This was the strongest increases since early 2009 and tallies with an IDS survey which has suggested that despite pay freezes in some industries that almost 90% of Q1 UK pay awards were in the region of 2 to 3.99%."
"Higher wage deals raise the likelihood of demand led inflation re-appearing and Weale could argue that a rate hike in the coming months could be necessary to prevent CPI inflation pushing above its 2% target in the medium-term. That said, a number of counter arguments remain."
"The first is centred on the persistent weakness of productivity in the UK labour force. Without a rise in productivity, it is likely that pay increases will naturally be capped. The second lies with the uncertainties connected with the budget and the impact of fresh austerity on growth."