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13 Nov 2014
MPC’s Inflation Report gives markets a reason to push pricing for the rate hike - SG
FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Research at Societe Generale, views the dovish than expected UK MPC's Inflation Report lowering expectations on growth and inflation, and giving every reason for market participants to push pricing of the first rate hike even further out.
Key Quotes
“Pushing rate hikes out into the future, well past the peak of the economic cycle - not to mention pushing them past an election which will be followed as night follows day by significant fiscal tightening- promises to seriously stunt the cycle.”
“If wage growth is accelerating and inflation is higher, then presumably rates will have to go on rising even if growth is slowing, but that's not an enticing prospect. With a bit of luck, growth will only slow modestly, but even then, as fiscal and monetary policy work in harness, I can't see a very protracted rate cycle.”
“A peak in rates of, say 1% or 2%, would certainly seem bizarre by historical standards, but then keeping rates at these levels while growth trundles along merrily at a 3.2% clip this year was pretty bizarre by historical standards too.”
“As for sterling, well, it's the fall guy. GBP/USD will fall all the way to 1.50 and EUR/GBP won't fall very fast from here.”
Key Quotes
“Pushing rate hikes out into the future, well past the peak of the economic cycle - not to mention pushing them past an election which will be followed as night follows day by significant fiscal tightening- promises to seriously stunt the cycle.”
“If wage growth is accelerating and inflation is higher, then presumably rates will have to go on rising even if growth is slowing, but that's not an enticing prospect. With a bit of luck, growth will only slow modestly, but even then, as fiscal and monetary policy work in harness, I can't see a very protracted rate cycle.”
“A peak in rates of, say 1% or 2%, would certainly seem bizarre by historical standards, but then keeping rates at these levels while growth trundles along merrily at a 3.2% clip this year was pretty bizarre by historical standards too.”
“As for sterling, well, it's the fall guy. GBP/USD will fall all the way to 1.50 and EUR/GBP won't fall very fast from here.”