Currency Analyst since 2010

GBP: Bank of England cut inflation forecasts

Here are the highlights of the Bank of England’s Inflation Report and Mark Carney’s speech:

-          Forecasts for inflation are reduced: for 2014 from 1.9% to 1.2%; for 2015 from 1.7% to 1.4%; for 2016 from 2.8% to 2.6%. Inflation rate likely to fall below 1% within 6 months, but will rise to the 2% target at end of 3-year forecast period.

-          Forecasts for GBP are also down: for 2015 from 3.1% to 2.9% and for 2016 from 2.8% to 2.6%.

-          The new forecasts are based on market expectations of the first rate hike in Oct. 2015.

-          Global growth outlook has weakened and so didn’t the outlook for British economy.

-          Decision not to raise rates early looks justified. Timing of the rate hike will depend on the economic data.

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