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UK A fine line – ING

FXStreet (Barcelona) - James Knightley, Senior Economist at ING sees the one year delay in rate hike expectations as an aggressive move.

Key Quotes

“Market rate hike expectations have been pushed back by nearly a year in the space of just three months – far too aggressive a move in our view.However, given the economic and financial market uncertainties, the BoE will be wary of prompting a major re-assessment of this right now.”

“In terms of our view, recent GDP revisions show that the economy has less spare capacity than originally thought and with the economy continuing to create jobs in significant numbers we suspect that wages will gradually respond, especially now that the national minimum wage has just been increased by 3%.”

“We think that the economy is strong enough to justify action in 2Q15 after the 7 May General Election, but earlier than the market anticipates. It may not be May, but in a healthy domestic environment we doubt that the BoE will wait until 4Q15 to hike as financial markets are currently anticipating.”

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