BoE’s shift in economic perspective – CAN

By FXStreet FXStreet (Delhi) – Peter Dragicevich Senior Currency & Rates Strategist at CAN, suggests that the downward adjustments to UK inflation & global concerns were interpreted as an explicitly dovish turn by the BoE.

Key Quotes

“While the BoE is more cautious, the underlying detail within the projections still point to policy tightening over the horizon. As the dust settles, the UK’s solid domestic fundamentals & a rate hike by the US Fed should see expectations for a BoE rate hike rebound. We continue to look for a BoE rate hike in Q2 2016, with risks it is delayed until Q3.”

“Relative to market expectations the headline message from the Monetary Policy Committee (MPC) was interpreted to be more dovish than expected.”

“The BoE maintained an 8-1 vote against a rate hike in November. But downward adjustments to the UK inflation projections and increased concerns about the global economy were latched onto by market participants as a sign the BoE favours a “lower for longer” interest rate outlook. Indeed, the BoE’s economic update was predicated on the first rate hike coming through in Q1/Q2 2017, out from Q2/Q3 2016 assumed in the August Inflation Report.”

“While this could simplistically be viewed as an overtly dovish turn, …read more

Source:: FX Street