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2 Sep 2015
UK: Interest rates hike, hit with a roadblock - Nomura
Fxstreet (Delhi) – Philip Rush, Research Analyst at Nomura notes that the UK interest rate hike cycle is more likely to start from later than February 2016 than earlier and there is a growing possibility that policy rates get stuck near the current level.
Key Quotes
“The structural improvement in unemployment appears less than we previously thought, owing to reduced relevance of raising the tax allowance.”
“A small positive output gap probably now exists, rather than a small negative one. Disinflationary pressure is instead coming from unusually depressed effective inflation expectations. Slowing in the labour market suggests effective stimulus has been reduced, mainly through an ongoing decline in the neutral interest rate.”
“The UK economy has already achieved over two years of brisk growth that has driven unemployment rapidly lower, thereby indicating this growth has been beyond the economy’s potential rate of expansion.”
Key Quotes
“The structural improvement in unemployment appears less than we previously thought, owing to reduced relevance of raising the tax allowance.”
“A small positive output gap probably now exists, rather than a small negative one. Disinflationary pressure is instead coming from unusually depressed effective inflation expectations. Slowing in the labour market suggests effective stimulus has been reduced, mainly through an ongoing decline in the neutral interest rate.”
“The UK economy has already achieved over two years of brisk growth that has driven unemployment rapidly lower, thereby indicating this growth has been beyond the economy’s potential rate of expansion.”