1 Oct 2014
BoE: Rate hike timing still unclear - Standard Chartered
FXStreet (Bali) - As Standard Chartered notes, BoE policy makers still diverge on how quickly slack is being absorbed, and hence on rate-hike timing.
Key Quotes
"The divergence in views among policy makers on levels of spare capacity and how quickly slack is being absorbed was revealed in August, when two MPC members, Martin Weale and Ian McCafferty, voted for a 25bps rise in the Bank Rate – this 2-7 split in the vote was repeated in September."
"BoE Governor Carney has hinted at early 2015 as a likely starting point for the rate-tightening cycle, with policy makers likely to act once they feel confident that wages are on a rising trend. We continue to expect a Q1-2015 hike, probably in February."
"Carney has emphasized that once the rate-hiking cycle starts, moves will be gradual and the end-point will be somewhat lower than the 4-5% reached in the pre-crisis era."
"The government aims at reducing its borrowing requirement to 5.5% of GDP in FY15 (started April 2014) and plans to eliminate the deficit by FY18. Underlying government borrowing for April-August was 6.2% higher than over the same period last year."
"The comparison with last year is distorted by special factors that resulted in higher revenues in the same period last year, but low earnings growth has also resulted in weaker-than-expected income tax revenues. Overall, the Office for Budget Responsibility (OBR) expects borrowing to decline by 11.4% in FY15, but the risk is that the fiscal deficit may overshoot targets."
Key Quotes
"The divergence in views among policy makers on levels of spare capacity and how quickly slack is being absorbed was revealed in August, when two MPC members, Martin Weale and Ian McCafferty, voted for a 25bps rise in the Bank Rate – this 2-7 split in the vote was repeated in September."
"BoE Governor Carney has hinted at early 2015 as a likely starting point for the rate-tightening cycle, with policy makers likely to act once they feel confident that wages are on a rising trend. We continue to expect a Q1-2015 hike, probably in February."
"Carney has emphasized that once the rate-hiking cycle starts, moves will be gradual and the end-point will be somewhat lower than the 4-5% reached in the pre-crisis era."
"The government aims at reducing its borrowing requirement to 5.5% of GDP in FY15 (started April 2014) and plans to eliminate the deficit by FY18. Underlying government borrowing for April-August was 6.2% higher than over the same period last year."
"The comparison with last year is distorted by special factors that resulted in higher revenues in the same period last year, but low earnings growth has also resulted in weaker-than-expected income tax revenues. Overall, the Office for Budget Responsibility (OBR) expects borrowing to decline by 11.4% in FY15, but the risk is that the fiscal deficit may overshoot targets."