20 Jun 2014
BoE: 2014 rate hike an upside risk, but not base case - TDS
FXStreet (Bali) - According to Martin Schwerdtfeger, FX Strategist at TD Securities, a 2014 rate hike by the BoE is an upside risk, but not BoE base case.
Key Quotes
"Governor Carney rocked the boat on a couple of occasions recently, first noting that markets were pricing in an earlier hike than the second quarter working assumption baked-in in May's Inflation Report, something he suggested was unwarranted; and, then going in the opposite direction with his Mansion House speech by signalling that rate hikes could happen earlier than the market expects –which was unchanged from the time of his first remark."
"We believe a 2014 rate hike is an upside risk, not BoE base case. The MPC sees rising upside risks to H2 growth and found it “somewhat surprising” in that context that the market had such a low probability of a hike priced for 2014."
"But this only highlights that the next BoE step depends even more now on the evolution of incoming data, as the economy is approaching the stage at which confidence in a self-sustained recovery should replace cautious optimism."
Key Quotes
"Governor Carney rocked the boat on a couple of occasions recently, first noting that markets were pricing in an earlier hike than the second quarter working assumption baked-in in May's Inflation Report, something he suggested was unwarranted; and, then going in the opposite direction with his Mansion House speech by signalling that rate hikes could happen earlier than the market expects –which was unchanged from the time of his first remark."
"We believe a 2014 rate hike is an upside risk, not BoE base case. The MPC sees rising upside risks to H2 growth and found it “somewhat surprising” in that context that the market had such a low probability of a hike priced for 2014."
"But this only highlights that the next BoE step depends even more now on the evolution of incoming data, as the economy is approaching the stage at which confidence in a self-sustained recovery should replace cautious optimism."