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BoE and MPC outcomes into year end - RBS

FXStreet (Guatemala) - The BoE will publish its latest quarterly Inflation Report and forecasts at 10:30 on Wednesday 12 November and we look into the outcomes into year end considering the recent shifts.

Key Quotes:

“The November MPC Minutes, including the policy votes, will be published at 09:30 on 19 November”.

“We expect the November Inflation Report forecasts to broadly validate market pricing for the first Bank Rate rise to come in August 2015”.

“Given the deteriorating global economic outlook and evidence of more broad-based (if mild) disinflation, there seems to be little incentive for policymakers to attempt to push back on current dovish market pricing”.

“The RBS forecast is for the first Bank Rate rise to come in August 2015, with Bank Rate reaching 1.0% at end-2015 and 1.5% at end-2016”.

“We expect the Report to show downward revisions to the MPC's (fairly elevated) GDP projections, currently: 3.5% in 2014, 3.1% in 2015 & 2.8% in 2016 (Chart 1). We doubt the MPC will lower their forecasts for 2015 and 2016 as far as our 2.3% and 2.0% forecasts; probably something more in the region of a 20bp reduction next year and little change to 2016”.

“The past year or so has been instructive vis-à-vis the MPC's reaction function. It took several quarters of sustained above-trend growth to nudge the Bank towards a 'hawkish' bias – Governor Carney's warning in June that a Bank Rate rise 'could happen sooner than markets currently expect'. By contrast, several weeks of financial market jitters, evidence of a faltering recovery in the euro area and ongoing anaemic wage inflation data in the UK have been sufficient to drive a significant change in market sentiment this autumn”.

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