HSBC's global chief economist, Janet Henry, spoke to Bloomberg TV earlier
- Don't expect a rate hike this year, and next year also
- Assuming a stable currency, inflation should be coming down quite quickly
- And also still coming off weak Q1 data, jury still out if it is weather-related
- But if labour market strengthens and upside surprises on wages, we could be wrong
- Global economy has been stronger than expected
- First rate raise last year was justified
- Only reason why BOE would want to tighten is if labour market strengthens and if it is reflected in the wages data
- But there's been a loss of momentum on wages data recently
- June is looking less likely for any breakthrough in Brexit talks
- As EU has a "busy schedule" with Greece, Italy, European integration
Given the way the BOE toned down their rhetoric since April, it seems very much the case that they would only want to see proof that they can raise rates now before actually communicating. A bit of a lesson learned, but then again we're talking about central bankers.
If Brexit discussions linger past the EU summit in June, then it could potentially add some degree of uncertainty for the BOE heading into the August meeting. And if data points up until then isn't very suggestive of a solid rebound from Q1, November looks the more likely timeline for the central bank to decide on whether or not to raise rates again.
