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18 Mar 2015
Sterling appreciation concerns give BoE Minutes a mildly dovish tone – RBS
FXStreet (Barcelona) - Reviewing the BoE Minutes, Ross Walker, Senior UK Economist at RBS, notes that the central bank's view regarding the appreciation of GBP being negative for meeting inflation target gave the Minutes a dovish tone.
Key Quotes
“Perhaps the key section in the text of the Minutes was:
‘Sterling had continued to appreciate, primarily versus the euro. . . Although monetary policy at home and abroad was only one of the many factors that influenced the exchange rate, especially in the near term, there was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the United Kingdom than in the euro area, might continue to put upward pressure on the sterling exchange rate.’
‘This had the potential to prolong the period for which CPI inflation would remain below the target and exacerbate the risk that lower expectations of inflation might become more persistent.”
“This echoes the Governor’s observations last week that the currency’s trade-weighted appreciation might require a longer period to elapse before the MPC raises Bank Rate.”
“The MPC’s collective position remains that ‘it was more likely than not that Bank Rate would increase over the next three years’ but there is little to suggest any sense of urgency in terms of pulling the trigger.”
Key Quotes
“Perhaps the key section in the text of the Minutes was:
‘Sterling had continued to appreciate, primarily versus the euro. . . Although monetary policy at home and abroad was only one of the many factors that influenced the exchange rate, especially in the near term, there was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the United Kingdom than in the euro area, might continue to put upward pressure on the sterling exchange rate.’
‘This had the potential to prolong the period for which CPI inflation would remain below the target and exacerbate the risk that lower expectations of inflation might become more persistent.”
“This echoes the Governor’s observations last week that the currency’s trade-weighted appreciation might require a longer period to elapse before the MPC raises Bank Rate.”
“The MPC’s collective position remains that ‘it was more likely than not that Bank Rate would increase over the next three years’ but there is little to suggest any sense of urgency in terms of pulling the trigger.”