FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, assessed the recent release of the BoE's QIR.

Key Quotes

"BoE’s QIR to further dampen pound upward momentum The pound has remained at weaker levels after weakening following the release yesterday of the less hawkish than expected BoE Quarterly Inflation Report The report prompted the market to push back expectations for the first BoE rate hike until at least February 2015, with the risks shifting as well to a later rather than earlier rate hike. Rate hike expectations have shifted back to roughly where they were during the first five months of 2014 prior to Governor Carney’s Mansion House speech in June. As a result GBP/USD has also fallen back towards its average during the first five months of the year at around 1.6650."

"The QIR revealed that the BoE is continuing to move closer to raising rates as the estimated amount of spare capacity has declined further to 1.0% of GDP although there is wide range of views on the MPC. The BoE also recognised that spare capacity is being used up more quickly, and is expected to continue to do so which resulted in material downward revisions to their unemployment rate forecasts."

"However, the BoE also judged that there has been a larger positive labour market supply shock which is helping to dampen wage growth and is expected to continue to do so at lower levels of unemployment. Their estimated natural rate of unemployment was lowered to 5.5%. As a result their inflation forecasts remained largely unchanged despite expectations for a materially lower unemployment rate."

"BoE Governor Carney also stressed the importance of wage and unit labour costs growth in determining the timing of rate hikes ahead. The BoE materially lowered its forecast for wage growth in 2014 by 1.25 point to 1.25% but still expects an acceleration to 3.25% in 2015. If wage growth continues to disappoint it would likely push back expectations for the first rate hike later into 2015."

Related Articles
  1. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  2. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  3. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  4. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  5. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  6. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  7. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  8. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.
  9. Investing Basics

    The Risks Of Buying Bitcoin

    Virtual currency is probably here to stay, but what about Bitcoin specifically? Does it have a first-to-market advantage? What are the risks involved?
  10. Forex News

    How The Forex "Fix" May Be Rigged

    When it comes to forex, some types of "fixes" are legal. But some really aren't.
RELATED TERMS
  1. No results found.

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!