FXStreet (Barcelona) - Analysts at Rabobank explained that Sterling markets have been buffeted in recent weeks by contrasting rhetoric from BoE Governor Carney regarding the timing of the first BoE rate hike.
“Carney wrong footed investors at the July 12 Mansion House speech by commenting that the relatively low probability attached to a bank rate increase this year was somewhat “surprising”. Then, in his testimony to the Treasury Committee on June 24, Carney reawakened a more dovish tone by suggesting that there is still more spare capacity in the labour market to be absorbed before the BoE can start to hike rates”.
“Surveys suggest that the market consensus for the timing of the first BoE interest rate hike of the cycle has been brought forward from Q2 2015 to Q1 2015, but we continue to favour May 2015 for the first hike. Our forecast is made on the basis that weak CPI inflation and low wage increases could allow the Bank plenty of room to maintain ultra low interest rates for some months yet”.
“Whilst the continued improvement in UK activity data is set to split the MPC vote well before next spring, we don’t expect any vote in favour of a hike to emerge from the committee before the autumn”.