Central banks around the world are on the horns of the dilemma of experiencing weak growth and rising inflation, which have contradictory implications for rates. |
From a rates perspective, this release will provide a much needed tonic to those looking for lower UK rates. |
Gilts rallied, as the BOE minutes had something for everyone. The market may have chosen to focus on the softness of growth. |
The core reading gives no evidence to substantiate the bank's concern over energy prices feeding through into higher wages. |
The market has reduced speculation about the likelihood of rate cuts anytime soon as the data is coming in pretty robust. |
The survey was much weaker than expected indicating the bank's rate cut has done little to assuage the malaise that continues to afflict the U.K. consumer. |
These data do further indicate that the housing market has stabilized at a much less ebullient level than seen in the recent boom years. We continue to look for modest house- price inflation going forward. |
We have a fairly pessimistic outlook on U.K. growth. Our interest-rate outlook for the U.K. going forward is favorable for bonds. |
While net exports corroborate the bank's view that the external sector poses a downside risk, the fact that the record deficit was driven by stronger domestic demand, means that they don't feel the need to respond with lower rates for now. |