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4 Feb 2016
Bank of England: We now expect first hike in 2017 (Q1) - Danske
After today’s documents from the Bank of England (statement, minutes and Quarterly Inflation Report) analysts from Danske Bank rose their estimation of the first rate hike from the second quarter 2016, to the first quarter 2017.
Key Quotes:
“The Bank of England has made it clear that it is definitely not ‘Fed light’. There are many reasons for the BoE to stay on hold for a long time: subdued wage inflation, ECB on an easing bias and Brexit uncertainties to mention a few.”
“Finally and perhaps most importantly, other central banks have stepped up monetary policy easing recently, with the ECB now expected to ease in March, the Bank of Japan having introduced a negative policy rate in January, and market participants no longer expecting that the Fed will hike this year. In this respect we note that being on hold is actually quite hawkish in the current environment and consequently we see little prospects of a BoE rate hike this year. We have thus postponed our expectations of the first BoE hike to Q1 17, probably in February (previous Q2 16, probably in May).”
“We have lowered our UK interest rates forecasts across the curve but we still project higher UK interest rates over the medium-term horizon as the BoE is priced too dovishly.”
Key Quotes:
“The Bank of England has made it clear that it is definitely not ‘Fed light’. There are many reasons for the BoE to stay on hold for a long time: subdued wage inflation, ECB on an easing bias and Brexit uncertainties to mention a few.”
“Finally and perhaps most importantly, other central banks have stepped up monetary policy easing recently, with the ECB now expected to ease in March, the Bank of Japan having introduced a negative policy rate in January, and market participants no longer expecting that the Fed will hike this year. In this respect we note that being on hold is actually quite hawkish in the current environment and consequently we see little prospects of a BoE rate hike this year. We have thus postponed our expectations of the first BoE hike to Q1 17, probably in February (previous Q2 16, probably in May).”
“We have lowered our UK interest rates forecasts across the curve but we still project higher UK interest rates over the medium-term horizon as the BoE is priced too dovishly.”