FXStreet (Guatemala) - RBS analysts explained that the BoE guidance is now confined to the medium-term: 'limited and gradual' rises in Bank Rate.
“The precise timing of the first hike – what Governor Carney dismisses as 'short-term noise' – remains a little hazy. The Governor's Mansion House speech (12 June) had the effect of bringing forward the window for the first rise to November 2014-February 2015 (a recent Reuters poll showed that 90% of City economists now expect the first hike to come during this period)”.
“The RBS forecast is for the first rise in February 2015, premised on our expectations for some moderation in GDP growth in H2 2014 and the persistence of disinflation pressures (especially wage inflation)”.
“We forecast 25bp hikes in February, May, August and November 2015, taking Bank Rate to 1.5% by end-2015. The pace of tightening is expected to slow subsequently: we forecast 25bp rises in H1 and H2 2016, taking Bank Rate up to 2.0% by end-2016”.
“Our expectations for the level of 'neutral' policy rates rests on the expected impact of policy tightening on households' debt-servicing costs – on our estimates, Bank Rate rises of 150bp-200bp would be sufficient to take the debt-servicing burden to above-average levels, indicative of a restrictive monetary policy stance”.