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BoE Inflation Report reinforces on-hold policy stance - RBS

FXStreet (Guatemala) - Analysts at RBS broke down the BoE’s November Inflation Report which rattled Sterling markets.

Key Quotes:

“The November Inflation Report left the CPI forecast essentially unaltered at the 2-3 year forecast point, reinforcing market expectations that the first rise in Bank Rate will not come until around August 2015”.

“The MPC's growth forecasts were trimmed as previous downside risks were brought into the central scenario (in our view, downside risks persist)”.

“The latest MPC forecasts show a more rapid decline in unemployment but essentially unchanged wage inflation, reinforcing the dovish policy signal. Overall, the November Report amounts to a near-fatal blow to a Bank Rate hike in February 2015, in all probability pushing the first rise beyond the May 2015 election”.

“Most importantly, the CPI inflation central projection was essentially unchanged at the 3-year forecast horizon: 1.95% vs 1.96% in the August Report. Taking the average CPI forecast over the year to the Q4 2017 forecast horizon, the November central projection stands at 1.92% vs 1.89% in August – again, a negligible difference”.

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