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17 Jul 2015
H1 2016 - a good bet for BoE hike - Fidelity
FXStreet (Mumbai) - Anna Stupnytska, Global Economist at Fidelity Worldwide Investment comments on UK interest rates following Mark Carney’s speech suggesting they could start rising as early as the turn of this year.
Key Quotes:
“Overall, the UK economy is in decent shape and continued improvement in the labour market and acceleration in earnings should help drive consumption in the second half of this year.“
“More importantly, UK headline inflation recently dipped to zero, with core inflation edging down in June. This low level of inflation is likely to stay with us for a while, partly driven by lower energy prices.”
“Although the drop in the oil price will fade away from the inflation figures around the autumn, this is still not the environment for an inflation spike, with the strong pound (particularly against the Euro) also contributing to low inflation.”
“Clearly, it’s not a rate hiking environment just yet, even though Mark Carney said this week that inflation falling back to zero would not prevent rate hikes.”
“I believe the BoE will want to at least see inflation heading in the direction of the target, rather than away from it, before they will be comfortable in hiking rates.”
“Ultimately, the Bank of England can afford to wait for now, especially given the ongoing tightening in financial conditions.
“I think that the first half of 2016 is a good bet for the first BoE hike, a few months after the Fed.”
Key Quotes:
“Overall, the UK economy is in decent shape and continued improvement in the labour market and acceleration in earnings should help drive consumption in the second half of this year.“
“More importantly, UK headline inflation recently dipped to zero, with core inflation edging down in June. This low level of inflation is likely to stay with us for a while, partly driven by lower energy prices.”
“Although the drop in the oil price will fade away from the inflation figures around the autumn, this is still not the environment for an inflation spike, with the strong pound (particularly against the Euro) also contributing to low inflation.”
“Clearly, it’s not a rate hiking environment just yet, even though Mark Carney said this week that inflation falling back to zero would not prevent rate hikes.”
“I believe the BoE will want to at least see inflation heading in the direction of the target, rather than away from it, before they will be comfortable in hiking rates.”
“Ultimately, the Bank of England can afford to wait for now, especially given the ongoing tightening in financial conditions.
“I think that the first half of 2016 is a good bet for the first BoE hike, a few months after the Fed.”