Friday April 20, 2018 - 12:57:34 GMT
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Doubts About A May Bank Of England Rate Hike Mounting
John M. Bland, MBA, co-founder, Global-View.com
Comments by Bank Of England Carney Adjust Market Thinking About May 10 Rate Hike Bank of England Governor Mark Carney roiled financial markets late Thursday with a speech at the IMF in Washington. His comments cast doubt on a rate hike at the May 10 Bank of England meeting. While Carney said the markets should prepare for a few interest rate hikes over next few years, he warned not to get overly focused on exact timing of a rate hike and that the focus should be more about the general path of interest rates. He said there will be some differences of opinion at the May MPC Meeting and is conscious of the fact that there are other meetings throughout remainder of year.
Latest Week Sees Some Nasty Surprises In U.K. Data The markets had a nasty surprise on Wednesday when U.K. “headline” inflation (CPI) saw the March Yr/Yr reading fall to 2.50% from 2.70% in February. This was the third fall in the last four months following last November’s peak of 3.1%. March “Core” CPI inflation fell to 2.30% from 2.40%. RPI inflation also fell to 3.3% from 3.6%. All these readings had been expected to be unchanged in the month.
These inflation figures were surprising in light of the recent increases in global oil prices. Analysts blamed women’s clothing prices, which rose at a slower than typical rate for this time of year. Also a change in the timing of the annual tobacco tax increases owing to the budget moving to the autumn threw off the seasonal adjustments. Economists say that the inflationary influence of the post-Brexit GBP weakness has worked its way through the system.
May 10 +25bp Rate Hike Still Possible? This has been a volatile week for the price of GBP and for Gilt yields, as on Tuesday average hourly earnings missed the February yr/yr estimate for a gain of 2.90% (actual 2.80%). Then on Thursday, March Retail Sales data fell -1.2% in March when a decline of just -0.50% had been expected. Analysts were feeling this week that a +0.25% rise in the Bank of England repo rate (currently 0.50%) was on the cards for the meeting on May 10. They felt the central bank must be responsive to a tight labor market and gradually increasing domestic inflationary pressures. It may be that these unexpected soft data now have key members of the MPC having second thoughts about the May policy tightening.
GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium
Mon 23 Apr 2018
A All Day- Flash PMIs
AA 14:00 US- Existing Homes Sales
Tue 24 Apr 2018
AA 01:30 AU- CPI
A 08:00 DE- IFO Survey
A 14:00 US- CB Confidence
A 14:00 US- New Homes Sales
Wed 25 Apr 2018
AA 14:30 US- EIA Crude
Thu 26 Apr 2018
AA 11:45 EZ- ECB Decision
A 12:30 US- Durable Goods
A 12:30 US- Weekly Jobless
Fri 27 Apr 2018
AA 03:00 JP- Bank of Japan
A 08:00 DE- Employment
A 08:30 GB- GDP
A 14:00 US- University of Michigan
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