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Edition February 5, 2016 - Crédit Agricole S.A.
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  • Edition February 5, 2016

    United Kingdom – Bank of England continues to expect the next rate move to be upward

    The BoE left its monetary policy unchanged in February, in line with expectations. The decision was unanimous, making a change from the outcome of votes in previous months. The BoE made significant downward revisions to its growth and CPI inflation projections alongside its February Inflation Report, with inflation projected to remain below the 2% target until the end of 2017.

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  • Contents:

    - Weak global growth outlook prompts downside revisions to MPC s expectations
    - CPI inflation to return to target by the start of 2018 and to overshoot thereafter
    - A rate cut not on the table

  • Extract: Wage developments under scrutiny as the BoE is mindful of second-round effects

    There was a major focus on wage-growth developments, whose weakness continues to contrast with the improvement in the UK labour market. Wage growth has been weaker than expected over the past few months and the updated MPC projections for CPI inflation take into account a weaker pattern for wage growth in the near term (and labour costs in general). While ruling out any deflationary effects occurring in the economy, nevertheless the MPC does expect that “low realised inflation will continue to moderate the increase in wage pressure in the near term” and that, although inflation expectations remain well anchored, “it remains watchful for signs that low inflation is having more persistent second-round effects on wages”.

  • UK: CPI inflation: actual and expected by the MPC

    CPI inflation is expected to remain below 1% until the end of 2016, which is 0.37ppt lower than expected back in November. This reflects the sharp falls in commodity prices – in particular oil prices (oil prices were 34% lower in sterling terms than at the time of the November Inflation Report) – but also near-term weakness in domestic labour cost inflation.

    UK: CPI inflation: actual and expected by the MPC
  • Associative topics : Economics | Europe


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