Details of the Bank of England's quarterly inflation report 13 May 2015
- Forecast based on first rate rise Q2-2016 (vs Q3 2016 in Feb)
- Rate increases likely more gradual than previous cycles
- 2016 GDP 2.6% vs 2.9% prior
- 2017 GDP 2.4% vs 2.7% prior
- Expects Q1 growth to be revised to 0.5% from 0.3%. Sees Q2 GDP at 0.7%
- CPI to hit quarterly low at 0.0% in Q2 2015
- Sees downside risk to inflation over 3 year forecast range
- Negative inflation likely over next few months
- Temporary falls in inflation should not be mistaken for deflation
- Wage growth Q4 2015 2.5% vs 3.5% prior. Q4 2016 4.0% unch. Q4 2017 4.0% unch
- Unemployment rate 5.0% in 2 years time vs 4.8% prior
- Margin of spare capacity absorbed next year. Feb forecast was next year and a half
- Sees lower growth due to higher interest rates, stronger pound, less home building and weaker productivity than in Feb
The shift in the forecast on the expected rate rise is mildly bullish but there's nothing here that really screams buy the pound with every penny you've got. As I mentioned, the warnings on inflation and growth downgrade will take some steam out of this rally but to how much is anyone's guess
GBPUSD has dropped to 1.5657 as the details came out
