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6 Jan 2015
BoE may raise rates in Q2 2015 – GS
FXStreet (Barcelona) - According to the Research Team at Goldman Sachs, the moderating UK and global growth developments as a result of soft UK data point that BoE may refrain from raising interest rates until Q4 of 2015.
Key Quotes
“Reflecting the weakness of UK price developments, both wages and consumer prices, and also reflecting a moderation in UK and global growth developments, we recently pushed back the timing of our forecast of the first BoE hike in this cycle to 2015Q4.”
“Mirroring the sharp rally in global fixed-income markets in recent months, the UK yield curve does not now price in the first BoE rate hike until 2016H1 (having priced in a hike by the end of 2014 less than six months ago).”
“If UK growth is weaker than we anticipate, if wage growth rises by less, or if inflation expectations become de-stabilised by low spot inflation during 2015, it is certainly possible that the first hike could slip into 2016.”
“However, if our relatively optimistic views on growth and wage inflation prove to be correct, we are comfortable with the view that the BoE will begin to tighten earlier than the market is currently discounting.”
Key Quotes
“Reflecting the weakness of UK price developments, both wages and consumer prices, and also reflecting a moderation in UK and global growth developments, we recently pushed back the timing of our forecast of the first BoE hike in this cycle to 2015Q4.”
“Mirroring the sharp rally in global fixed-income markets in recent months, the UK yield curve does not now price in the first BoE rate hike until 2016H1 (having priced in a hike by the end of 2014 less than six months ago).”
“If UK growth is weaker than we anticipate, if wage growth rises by less, or if inflation expectations become de-stabilised by low spot inflation during 2015, it is certainly possible that the first hike could slip into 2016.”
“However, if our relatively optimistic views on growth and wage inflation prove to be correct, we are comfortable with the view that the BoE will begin to tighten earlier than the market is currently discounting.”