Back
6 Jan 2014
Flash: BoE on hold, but hinting at more guidance? - BAML
FXstreet.com (London) - Nick Bate, strategist at Bank of America Merrill Lynch looks into the guidance beyond the 7% unemployment rate threshold from the BoE.
Key Quotes:
“Since the BoE rolled out its forward guidance in August 2013, the headline unemployment rate has fallen from 7.8% to 7.4%, notably faster than it expected.”
“Moreover, the headline unemployment rate is a rolling 3-month average, and the latest 1-month estimates for September and October were 7.1% and 7.0%, respectively. So, even with a notable rise in the 1-month unemployment rate in November (which is plausible, given its volatility), the 3-month average could fall further toward the BoE's 7% forward guidance threshold”.
“The BoE has commented that as the unemployment rate approaches that threshold, it will likely set out some further views on the prospects for monetary policy beyond that point”.
“Thus, while the exceptionally strong pace of job growth of late - surpassed only once in the last 40 years - seems likely to slow somewhat, the possibility that the unemployment rate could soon fall to close to 7% suggests the BoE may start considering the issue imminently”.
“Its February Inflation Report might be the most opportune time to set out some more-detailed views on the issue, but it could potentially start to lay some groundwork with a statement alongside its monetary policy decision this week, in our view”.
Key Quotes:
“Since the BoE rolled out its forward guidance in August 2013, the headline unemployment rate has fallen from 7.8% to 7.4%, notably faster than it expected.”
“Moreover, the headline unemployment rate is a rolling 3-month average, and the latest 1-month estimates for September and October were 7.1% and 7.0%, respectively. So, even with a notable rise in the 1-month unemployment rate in November (which is plausible, given its volatility), the 3-month average could fall further toward the BoE's 7% forward guidance threshold”.
“The BoE has commented that as the unemployment rate approaches that threshold, it will likely set out some further views on the prospects for monetary policy beyond that point”.
“Thus, while the exceptionally strong pace of job growth of late - surpassed only once in the last 40 years - seems likely to slow somewhat, the possibility that the unemployment rate could soon fall to close to 7% suggests the BoE may start considering the issue imminently”.
“Its February Inflation Report might be the most opportune time to set out some more-detailed views on the issue, but it could potentially start to lay some groundwork with a statement alongside its monetary policy decision this week, in our view”.