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BoE sees CPI below target in 2 years, risks balanced - no rate hikes for a long time
inspector_monkfish
Posts: 9,276 Forumite
10:30 11Nov09 BOE CHART SHOWS CPI BELOW TARGET AROUND 1.6 PCT IN 2 YRS, ASSUMING MARKET RATE PATH, 200 BLN STG QE
10:30 11Nov09 BOE - MPC JUDGES RISKS OF INFLATION BEING ABOVE OR BELOW TARGET IN 2 YRS BROADLY BALANCED
10:30 11Nov09 BOE CHART SHOWS GDP GROWTH RETURNING START OF 2010, REACHING ABOUT 3.75 PCT IN 2 YRS
10:30 11Nov09 BOE CHART SHOWS LEVEL OF GDP RETURNING TO PRE-RECESSION PEAK IN EARLY 2011
10:30 11Nov09 BOE - CPI LIKELY TO RISE SHARPLY ABOVE 2 PCT TARGET IN NEAR TERM, SLACK TO APPLY DOWNWARD PRESSURE
10:30 11Nov09 BOE - MARKET RATE PATH ASSUMES 0.5 PCT Q1 2010, 0.6 PCT Q2, 1.1 PCT Q3, 1.6 PCT Q4, 2.1 PCT Q1 2011
10:30 11Nov09 BOE - MPC HAS RANGE OF VIEWS ON OUTLOOK FOR INFLATION, SIGNIFICANT RISKS IN EACH DIRECTION
10:30 11Nov09 BOE - CPI PROFILE HIGHER THAN AUGUST, SLIGHTLY STEEPER GDP RECOVERY OVER FORECAST HORIZON
10:30 11Nov09 BOE - RECOVERY IS LIKELY DUE TO MONETARY AND FISCAL STIMULUS, WEAKER STERLING, STRENGTH V UNCERTAIN
10:30 11Nov09 BoE sees CPI below target in 2 years, risks balanced
LONDON, Nov 11 - British inflation will be below target in two years time if interest rates rise gradually from the middle of next year as financial markets expect, the Bank of England said in its quarterly Inflation Report on Wednesday.
However overall the Monetary Policy Committee saw broadly balanced risks of inflation being above or below their 2 percent target by late 2011, suggesting little immediate need for more quantitative easing.
"A recovery in output is likely, driven by the considerable stimulus from the past easing in monetary and fiscal policy and the depreciation of sterling," the BoE said. "But constraints on the supply of bank credit and concerns over balance sheets will weigh on spending."
The Bank of England slashed rates last year after Britain entered its sharpest recession in decades, and since March has held interest rates at a record low of 0.5 percent and announced 200 billion pounds of asset purchases with newly-created money.
Charts in the BoE report showed that the central bank expects inflation to rise sharply to above 2 percent in the next few months -- higher than forecast in August -- before easing back to around 1.6 percent in the medium term.
Those forecasts are based on financial market assumptions of interest rates averaging 0.6 percent in the second quarter of 2010, rising steadily to 2.9 percent in Q3 2011.
"The risks of inflation being above or below target are broadly balanced by the end of the forecast period. But there are significant risks to the inflation outlook in each direction," the Bank said.
This assessment could suggest that last week's announcement of an expansion to the central bank's quantitative easing programme could be the last, although the Bank has scope to change its view before the 200 billion pounds of funds are spent by next February.
BoE projections show growth returning at the beginning of 2010, similar to August's forecasts, but then increasing slightly more rapidly than previously forecast to around 3.75 percent at the end of 2011.
The level of GDP is seen returning to its pre-recession peak at the beginning of 2011.
10:30 11Nov09 BOE - MPC JUDGES RISKS OF INFLATION BEING ABOVE OR BELOW TARGET IN 2 YRS BROADLY BALANCED
10:30 11Nov09 BOE CHART SHOWS GDP GROWTH RETURNING START OF 2010, REACHING ABOUT 3.75 PCT IN 2 YRS
10:30 11Nov09 BOE CHART SHOWS LEVEL OF GDP RETURNING TO PRE-RECESSION PEAK IN EARLY 2011
10:30 11Nov09 BOE - CPI LIKELY TO RISE SHARPLY ABOVE 2 PCT TARGET IN NEAR TERM, SLACK TO APPLY DOWNWARD PRESSURE
10:30 11Nov09 BOE - MARKET RATE PATH ASSUMES 0.5 PCT Q1 2010, 0.6 PCT Q2, 1.1 PCT Q3, 1.6 PCT Q4, 2.1 PCT Q1 2011
10:30 11Nov09 BOE - MPC HAS RANGE OF VIEWS ON OUTLOOK FOR INFLATION, SIGNIFICANT RISKS IN EACH DIRECTION
10:30 11Nov09 BOE - CPI PROFILE HIGHER THAN AUGUST, SLIGHTLY STEEPER GDP RECOVERY OVER FORECAST HORIZON
10:30 11Nov09 BOE - RECOVERY IS LIKELY DUE TO MONETARY AND FISCAL STIMULUS, WEAKER STERLING, STRENGTH V UNCERTAIN
10:30 11Nov09 BoE sees CPI below target in 2 years, risks balanced
LONDON, Nov 11 - British inflation will be below target in two years time if interest rates rise gradually from the middle of next year as financial markets expect, the Bank of England said in its quarterly Inflation Report on Wednesday.
However overall the Monetary Policy Committee saw broadly balanced risks of inflation being above or below their 2 percent target by late 2011, suggesting little immediate need for more quantitative easing.
"A recovery in output is likely, driven by the considerable stimulus from the past easing in monetary and fiscal policy and the depreciation of sterling," the BoE said. "But constraints on the supply of bank credit and concerns over balance sheets will weigh on spending."
The Bank of England slashed rates last year after Britain entered its sharpest recession in decades, and since March has held interest rates at a record low of 0.5 percent and announced 200 billion pounds of asset purchases with newly-created money.
Charts in the BoE report showed that the central bank expects inflation to rise sharply to above 2 percent in the next few months -- higher than forecast in August -- before easing back to around 1.6 percent in the medium term.
Those forecasts are based on financial market assumptions of interest rates averaging 0.6 percent in the second quarter of 2010, rising steadily to 2.9 percent in Q3 2011.
"The risks of inflation being above or below target are broadly balanced by the end of the forecast period. But there are significant risks to the inflation outlook in each direction," the Bank said.
This assessment could suggest that last week's announcement of an expansion to the central bank's quantitative easing programme could be the last, although the Bank has scope to change its view before the 200 billion pounds of funds are spent by next February.
BoE projections show growth returning at the beginning of 2010, similar to August's forecasts, but then increasing slightly more rapidly than previously forecast to around 3.75 percent at the end of 2011.
The level of GDP is seen returning to its pre-recession peak at the beginning of 2011.
Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)
(MSE Andrea says ok!)
0
Comments
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10:38 11Nov09 UK ECON: Hit & Miss on the Inflation Target
November 11, 2009
The risk was that the MPC would forecast that UK inflation would hit or be
above target over the 2-year horizon based on 200bn of QE and market rates.
The BoE has instead suggested that the inflation target will be missed and CPI will be around 1.6% in 2yrs and further suggesting that if market rates were to stay at 0.50% then the inflation target would be hit. This suggests that the BoE is not wiling to entertain market expectations for a rate hike during 2010 and instead taking a more balanced view with regards to the inflation outlook. We think the inflation report supports our theme of "lower for longer" and we continue to favour a spread narrowing on 2y1y/1y1y GBP.Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0 -
http://www.bankofengland.co.uk/publications/inflationreport/ir09nov.pdf
Some interesting charts. (GDP and inflation especially)0 -
Those forecasts are based on financial market assumptions of interest rates averaging 0.6 percent in the second quarter of 2010, rising steadily to 2.9 percent in Q3 2011.
Must be one of the best times in recent history to be sat on a pre 2008 tracker:beer: with my mortgage tracker steadily rising to 3.85% over the next two years (pity I am not talking advantage
), I once paid over 15% :eek: 'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0 -
Those forecasts are based on financial market assumptions of interest rates averaging 0.6 percent in the second quarter of 2010, rising steadily to 2.9 percent in Q3 2011.
Must be one of the best times in recent history to be sat on a pre 2008 tracker:beer:
I don't know my Oct 08 one is OK.
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10:31 11Nov09 RTRS-UK GILT FUTURES EXTEND LOSSES TO SESSION LOW AFTER BOE INFLATION REPORT FORECASTS
10:31 11Nov09 RTRS-STERLING EXTENDS GAINS VS DOLLAR <GBP=D4> AFTER BOE INFLATION REPORT
10:33 11Nov09 RTRS-UK GILT FUTURES RECOVER FROM SESSION LOW, NOW HIGHER THAN BEFORE BOE FORECASTS
10:34 11Nov09-STERLING TURNS LOWER, REVERSING GAINS AFTER BOE'S KING SAYS WEAKER STERLING WILL HELP EXPORTS
10:36 11Nov09-STERLING HITS SESSION LOW VS DOLLAR OF $1.6681 <GBP=D4>; EURO HITS SESSION HIGH OF 90.13 PENCE <EURGBP=D4>
10:36 11Nov09-SHORT STERLING FUTURES RALLY AFTER BOE FORECASTS, UP AS MUCH AS 5 TICKS IN BACK-MONTH CONTRACTS
10:46 11Nov09-Sterling falls sharply after BoE's King comments
LONDON, Nov 11 - Sterling fell to session lows against the dollar and the euro on Wednesday after Bank of England governor Mervyn King said a weak pound would help the UK economy rebalance towards exports.
The comments [ID:nBOE002098] came after the latest quarterly Inflation Report showed UK inflation will be below target in two years time if interest rates rise gradually from the middle of next year as financial markets expect.
However overall the Monetary Policy Committee saw broadly balanced risks of inflation being above or below their 2 percent target by late 2011, suggesting little immediate need for more quantitative easing. [ID:nBOE002097]
Sterling fell to a session low of $1.6646 against the dollar <GBP=D4> after King's comments, a fall of around half a percent on the day. It had initially risen to a session high of $1.6799 from $1.6748 just after the release of the inflation forecasts.
The euro rose to a session high of 90.31 pence <EURGBP=D4>, up 0.8 percent on the day, from 89.67 before the release.
The December gilt future <FLGZ9> hit a session low of 116.64 immediately after the forecasts, but recovered swiftly to stand at 116.91 at 1036 GMT, down 33 ticks on day, having stood at 116.75 beforehand.
Short sterling futures <0#FSS:> rallied to stand as much as five ticks higher across the strip, having been between one and four ticks lower beforehand.
Bunds were little moved after the report, falling 4 ticks to mark fresh session low of 121.24 before quickly recovering to 121.33 by 1035 GMT.
Britain's FTSE 100 <.FTSE> remained up 1 percent at 5281.48, showing little immediate reaction to the Bank of England's latest Inflation Report.Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0 -
Those forecasts are based on financial market assumptions of interest rates averaging 0.6 percent in the second quarter of 2010, rising steadily to 2.9 percent in Q3 2011.
Must be one of the best times in recent history to be sat on a pre 2008 tracker:beer: with my mortgage tracker steadily rising to 3.85% over the next two years (pity I am not talking advantage ), I once paid over 15% :eek:
Yes - good news for us tracker holders :T0 -
'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher0
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10:58 11Nov09 MARKET TALK: Short Sterling Rallies On BOE Inflation Report
1058 GMT - Short sterling rallies after the BOE inflation report and as comments by governor King appear dovish, with inflation more likely to stay below the 2% target than above over the forecast period, except for a small short-term jump due to VAT and weaker sterling. December '09 short sterling is up 1.5 bps to 99.38, March '10 is up 4.5 bp to 99.26, June '10 climbs 7.5 bps to 98.91 and September '10 rallies 6.5 bps to 98.40. (NKA)Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0 -
Erm, yeah.
But these forecasts are based upon being in line with government spending plans aren't they? As discussed yesterday? Which will mean that they are on the optimistic side?
http://forums.moneysavingexpert.com/showthread.html?t=2069267
However, interesting to see that IR's are expected to increase from mid next year onwards. Wonder what that could mean...It's getting harder & harder to keep the government in the manner to which they have become accustomed.0
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