Back on the 26th July I pointed to the Overnight index swap implied probability report, which showed that there was a 46.2% expectation of a rate cut at last weeks meeting.
Last night Carney said he felt the market reaction was marginal to the new forward guidance issued by the MPC. He’s quite right.
There was a lack of movement in the long end and it’s only had a marginal effect on near term expectations.
The chances of a rate cut in September are down to 33.1% from 46.7%. Given Carney’s report one would have expected this to come down much further.
Rate rises are staring to come in with 1.8% on a 0.25% rise in Dec, 1.6% in Jan 2014 and 6.3% in Feb.
Obviously this is nothing to take to the bank now, but it will be good to monitor over the coming months to see how expectations play out. It’s the expectations that will have the big say in the market.
Additionally, Schroders is the latest bank to push their expectation of UK rate rises to 2017 from 2015