At 0930GMT on Wednesday (May 14) the Bank of England releases its quarterly Inflation Report and governor Carney will speak.
(Note also, prior to the release of the report we get the UK April employment data (the headline ‘claimant count’, or jobless count … expected is -30K, prior was -30.4K; and the unemployment rate expected is 6.8%, while the prior was 6.9%)
OK, so what’s expected in the Inflation report?
- The report will contain the bank’s latest forecasts for growth and inflation; but the market will also be looking for the bank’s views (or at least hints to those views) on the timing of rate increases, the housing market price gains, and the strength of the currency
- The Bank’s view of the economy is expected to be decidedly more upbeat
- But it is unclear how much this will translate into their view on the inflation outlook – persistent deflation in Europe is influencing pricing power in the UK
- Still, the risk is the Bank becomes a touch more hawkish on rates. It is not likely that this will translate to much more than general comments on coming hikes (not specifics). The Bank will not want to risk choking the nascent economic expansion
- While GBP has seen selling this week ahead of the report, dealers are attributing this to profit-taking and expectations are that depending on the extent of the hawkish bias from the BoE and Carney, GBP should find buying support again
- The next monetary policy meeting in the UK is on June 17. This may be (and is, in my opinion) a little too soon to look for some sort of tightening action, or even overly-hawkish statements, though. Expectations are currently for a rate hike late in the first quarter of 2015
