BoE July meeting forecasts; a tighter outlook - BAML

By FXstreet.com | July 08, 2014 AAA

FXStreet (Guatemala) - Analysts at Bank of America Merrill Lynch explained that at their July meeting, the BoE will confront the same opposing forces that have persisted throughout the last few months.

Key Quotes

"At their July meeting, the BoE will confront the same opposing forces that have persisted throughout the last few months: strong growth, and weaker-than-expected inflation. As evidenced by the June PMIs near-term growth indicators remain firm, consistent with a continuation - or indeed a moderate strengthening - of the circa 3% annualised GDP growth experienced since last spring, in line with the BoE's May forecasts."

"Alongside that, labour market volumes have remained incredibly strong: the recent pace of employment growth was the fastest in at least 40 years (equivalent to US non-farm payrolls of around 500k), pulling the unemployment rate down from 7.2% to 6.6% in the past three months. With average hours and the participation rate also rising, all three indicators the BoE uses to assess slack in the labour market have tightened of late”.

"All else equal, that would warrant a tighter outlook for monetary policy. In addition to that, capacity utilisation indicators suggest that productivity is close to equilibrium."

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