Talk about being disappointed with that cable move. It’s pathetic. That said, it’s all about learning and the prices are our teacher. As Mike noted, no shocks in seeing who voted for hikes. There’s still some trepidation shown in the minutes regarding the economy. The BOE have noted that wholesale gas prices have risen around 5% in reaction to Russian sanctions and they note that a further escalation of tensions there could impact prices further. One to watch for in the next inflation figures.
On the plus side they say that the expected second half slowdown may not be as much as they touted at the May inflation report.
They note that the currency’s recent rises showed little signs of denting export demand. A BOE survey said that;
“the main impact of the appreciation so far had been to reduce sterling sales values, and so profit margins, rather than volumes. This had partially unwound some of the increase in exporters’ average margins seen following the sterling depreciation at the onset of the financial crisis. Some firms anticipated that the impact on export sales volumes would be more pronounced were sterling to appreciate further.”
On Housing they expect prices to moderate as supply increases and demand falls but noted that the effects on housing and mortgages from the Mortgage Market review had begun to wane. The cite a RICS report that showed that new buyer enquiries at estate agents had fallen for the first time in 18 months in July.
On jobs and wages they note that the weakness in wages may be because;
“after several years where stagnant or falling real wages and productivity had been the norm, workers might be more likely to acquiesce to continued wage restraint.”
Basically they see workers happy to be in a job and so won’t be interested (yet) in pushing for higher wages.
The rest is pretty much par for the course, downside risks to the economy from global events, weakness in Europe, worries over productivity and particularly the risk that it is weaker than they forecast, falling unemployment to slow.
Finally, a new proposition was voted for to say that they are working on the QE/balance sheet exit strategy in greater detail now and would announce details in the coming months. How they unwind QE is probably not going to cause big headlines and it’s likely to be a long slow drawn out affair so to limit any market impact.
Overall it’s still a “middle of the road” assessment, neither dovish or hawkish and that’s a big reason why the pound hasn’t shown a bigger move. It’s all about the timing now and whether the economy pushes us towards a rate rise sooner rather than later.
Inflation and wages will be the figures that will get the greatest focus and if the expected slowdown isn’t as bad as expected then the pound could start to find a bottom. At the moment though it’s all about the US dollar so bear that in mind.
