BoE Inflation Report – Back to basics – RBS

By FXstreet.com | August 08, 2014 AAA

FXStreet (Guatemala) - Analysts at RBS explained that the BoE's 'explicit forward guidance' experiment repeated tinkering, awkwardly large forecast revisions and sometimes clumsy communication will probably not go down in history as the Old Lady's finest hour.

Key Quotes:

“It is time to get 'back to basics' by providing a clearer, less convoluted form of policy signalling via a renewed focus on the CPI central projection”.

“This is not to say that the debate about the strong employment-weak wage inflation conundrum (or any other aspect of the economy) is irrelevant. On the contrary, the MPC's assessment of the extent to which structural disinflationary forces are at work in the labour market is crucial – especially in terms of conditioning expectations about 'neutral' or 'terminal' policy rates”.

“Our point is simply that the various 'intermediate thresholds' and estimates of 'medium-term equilibrium' unemployment rates, output gaps etc have not, in practice, provided much useful clarity about the MPC's reaction function. Many of the key inputs into the August forecast – recent trends in GDP, inflation, market interest rates, the exchange rate, oil prices – appear to give the MPC sufficient leeway to delay any Bank Rate hike until into 2015. . . the key question is whether they want to”.

comments powered by Disqus
Related Forex Analysis
  1. GBP/USD sitting pretty despite lower CPI’s
    Forex News

    GBP/USD sitting pretty despite lower CPI’s

  2. GBP/USD technical are mixed - Scotiabank
    Forex News

    GBP/USD technical are mixed - Scotiabank

  3. Still solid GDP growth - BNP
    Forex News

    Still solid GDP growth - BNP

  4. GBP/USD extends gains, nears 1.6100
    Forex News

    GBP/USD extends gains, nears 1.6100

  5. USDOLLAR Breaks October Downtrend, GBP’s GDP Rally Fizzles
    Forex News

    USDOLLAR Breaks October Downtrend, GBP’s GDP Rally Fizzles

Trading Center