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Bank Of England Post Mortem: Rate Hike On Hold Due To Crashing Commodities, Strong GBP
From CA's Valentin Marinov
BoE inflation report - strong GBP made all the difference it seems
Reading through the August inflation report two things seem to stand out:
1/ The MPC is more optimistic on (domestic demand-driven) GDP growth – supported by growing wages, cheaper bank funding and growing house prices. Indeed, they revised their growth projections slightly to the upside compared to May.
2/ The MPC has turned more cautious on inflation because of persistent commodity price weakness and, indeed, FX appreciation. This is reflected in their lower inflation projections.
The message is: yes, we will hike but not before we are certain that the negative impact from lower commodity prices and stronger GBP have abated. The above also means that to a certain degree the decision to hike or not is not really in BoE’s hands, at least for now. This is different from the Fed, where we do see clear signals that hikes will be needed fairly soon.
This also means that verbal intervention in GBP by Carney is now a distinct risk going into the press conference at 12:45
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Update:
Many investors (especially the GBP-bulls) likely found the super Thursday rather underwhelming. If anything, we know now that the BoE is watching a factors - internal and external - when decide on the policy outlook. As regards the post-IR press conference, I was very interested to hear what Carney has to say on the impact of GBP on inflation and external imbalances. My impression is that, while the BoE is monitoring the latest FX appreciation, there doesn't seem to be an immediate worry as such.
All that highlights the data dependent nature of the BoE's policy outlook at present. It seems that the BoE will respond in equal measure to evidence of domestically driven inflation and external disinflation. I would think that persistent GBP strength and/ or global commodity price weakness could force the BoE to wait for a bit longer from here. Essentially this is a warning for the GBP-bulls - sustained FX appreciation from here could shift the balance of risks against early rate hikes.
With the BoE's policy trifecta behind us focus will shift to NFP tomorrow. If anything, and different from the BoE, the Fed does seem closer to hiking rates. This means that it would take a significant NFP disappointment for markets (eg a print less than 200K) to abandon bets on September lift-off. In the absence of disappointment, the USD should remain supported broadly. We continue to see risks for GBP/USD on the downside from here.
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Screw Carney – let's skip directly to the carnage part.
Translation: It's bloody out of control!
Commodity prices crashing through the floor
Rates already as low as they can go
And can't raise rates to lower them later either.
The global economy is fucked
NIRP , Bitchezzzzzzz
He's a moron.
He left Canada in a mess with its debt to GDP and a housing bubble, and now he's putting a rate hike on hold because of the strong Pound.
What the hell does he expect to happen when he keeps hinting at a rate increase?
DavidC
The only commodity most are interested in as Mars Bars, and those fuckers are in rampant inflation you piece of shit Carney...
Why would commodities be crashing if the GDP is ribust? More bullshit from the left hand?
copy paste to every cb statement.... lol
gee wiz, sumting wong with the demand side of the equation...
we will hike but not before we are certain that the negative impact from lower commodity prices and stronger
Translation:
We will never hike
correction: there CAN'T be a rate hike because of the math and the reality that they are cornered with their only option left- MOAR QE.
QE and Bail-In's ,
News flash. None of these CB's can raise rates, ever.
Its called a liquidity trap.
"You cant taper a Ponzi Scheme" Mitch feierstein - Planet Ponzi
Fuck all the criminal Central banks and thier many criminal Political flunkies. Shut the "raise rates" bull shit already.
Our Saudi masters say Thank You.
all we can really do is try to enjoy the ride. find some joy and try to ignore reality, by lol'g it to the background of our mind.
So the Pound is 'strong' even though interest rates are just about as low as they've ever been, yet raising rates will 'strengthen' the Pound?
Unpredictablity, volatility and stupidity seem to be in control of all facets of both the political and economic arena.
Am stunned that people actually fall for this rate-hike nonsense. Never going to happen. Unless, of course they are prepared to leave the planet and watch it implode.
Carney: Rate rise = data dependent.
Good for him that's there's always some 'data' that can be used to delay a rise. Remember how we were all lectured that 0% was an 'emergency' measure otherwise the sky would havefallen on our heads. Now all the propaganda media tell us the British economy is 'booming'. Read the papers, there's at least 2 articles a daydrumming this point in.
This guy is a fucking joker, he's been a Central Banker for about 10 years now and has never ONCE raised rates. Can you believe that?
Having said that, he's actually doing what he's been paid for which is not to raise rates. And all the mugs out therethought he was a civil servant working on their behalf, hahaha.
When will these fucking economist wankers realise an exchange rate doesn't really matter that much when it comes to exports if your exports are good.
You compete on QUALITY and SERVICE, not on price. British can do both of those and many forward thinking and smart companies are doing just that. The ones exporting shit, rework your business plan jackasses.
Said this a week ago. The BOE has zero desire to raise rates and will keep coming with excuse after excuse until the market forces its hand. http://market-guru.co.uk/uk-interest-rates-nowhere/
Ah Huh, so not raising rates because commodities are getting cheaper, Well there's always next year....
Geepers, never saw that coming.
I guess Janet will be saying the same thing.
Shocker.
But the stock market is at a record...because? Maybe if these corrupt people...stopped pumping the stock market full of money...then act economic would take hold! We need to destroy the mega banks! Or WE ARE DOOMED!
Shocking. Just damn shocking. Now if the Crown had reversed the reformation, or invaded France (again) that would be news.