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Trader, analyst and instructor with a 6-year experience

The BoE cut 2014 wage growth forecast

The Bank of England sounded more dovish than expected, cutting wage growth forecasts and giving no timing on rate hikes. GBP/USD slipped to a fresh 2-month low of $1.6720 on the news. 

Forecasts:

  • 2014 wage growth forecast revised down from +2.5% to +1.25%
  • unemployment rate seen at 5.4% in two years
  • "market" sees  first rate rise in Q1 2015 reaching 2% by Q4 2016
  • the 2% inflation target remains unchanged

Marc Carney:

  • MPC does not have a particular threshold for wage growth to trigger a rate hike
  • expensive GBP hurts British exports
  • slow and small rate hikes will mitigate risk that higher borrowing costs trigger slowdown
  • pick up in productovity slack will take longer than previously expected
  • slowdown on the housing market is due to new FCA mortgage rules and will be short-lived

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