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Markets targeting February 2015 for first BoE hike - RBS

FXStreet (Guatemala) - Analysts at RBS explained that the August Inflation Report brought only a marginally more dovish inflation outlook.

Key Quotes:

“But this was enough to prompt a significant retreat by financial markets, which scuttled away from November 2014 and towards February 2015 for the first Bank Rate hike. There is a sense from some quarters of growing frustration with the MPC and its guidance framework”.

“There is something surreal, even medieval, about theoretical arguments over unknown, unquantifiable changes in unobservable variables such as the output gap or the NAIRU”.

“Far better, in our view, to focus more on underlying wage inflation trends, which continue to look extremely benign”.

“Most importantly, in our view, the CPI inflation central projection was lowered at 2-year point (1.77% from 1.89%) and barely altered at 3-year point (1.96% vs 1.95%). So a slightly larger undershoot over the policy-sensitive 2-3 year forecast period as a whole (an average of 4bp), but an essentially unchanged/at-target forecast at 3-years”.

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