BoE: First rate hike forecast changed to February 2017 – Rabobank

By FXStreet Jane Foley, Senior FX Strategist for Rabobank, explains that the Bank of England is unlikely to raise rates during the current year.

Key Quotes:

“Both banks (European Central Bank and Bank of England) are wary about second round effects from low inflation and in the UK especially there are concerns about the impact on wage negotiations. On this basis we are mindful that many of the MPC members may be reluctant to hike interest rates until 2017.”

“The sharp drop in sterling since the end of last year will offset some of the drag on inflation stemming from soft commodity prices and could hasten the recovery in the UK CPI inflation. This factor combined with the better tone of oil prices suggests that the resident hawks at the MPC could be indicating a preference for a rate hike in the second half of this year.”

“Even so, the combination of disappointing wage growth, weak gains in productivity in addition to political uncertainty suggests that the majority of the committee may favour a cautious approach to policy. Consequently we have delayed our forecast for the first hike in BoE rates from November 2016 to February 2017.”
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Source:: FX Street