BoE keeps rates on hold, might hike in Q3 15 – Danske

FXStreet (Barcelona) - Mikael Olai Milhøj, Analyst at Danske Bank, reviews UK MPC’s announcement, and further forecasts MPC to hike rates in Q3 15 if inflation rises.

Key Quotes

“As expected, the Monetary Policy Committee (MPC) has just announced that it voted to maintain the Bank Rate and the stock of asset purchases at 0.50% and GBP375bn, respectively.”

“There was no statement in connection with the announcement. We will get more insight into how the MPC sees the UK economy developing when the quarterly Inflation Report and the minutes from the meeting are published (due for release on 12 February and 18 February, respectively).”

“In the Inflation Report, we will in particular look for any comments on wage growth, as future wage growth will be a key determinant of when the MPC hikes, in our view.”

“Wage growth has been increasing since June 2014 and, if it picks up further in the coming months, it could lead to higher core inflation and thereby increase the likelihood of a hike.”

“Currently we expect the MPC to hike in Q3 15, but there is a risk of this not happening due to the low inflation, which could enable the MPC to be more patient. “