RANsquawk PREVIEW: BoE Quarterly Inflation Report – 08/08/12
Bank of England expected to revise their growth and inflation forecasts lower from their Q2 report - justifying additional asset purchases in November.
Due for release at 1030BST/0430CDT.
Today sees the Bank of England release their Quarterly Inflation Report for Q3, in which markets are expecting the board to have revised lower their GDP and inflation outlooks for the medium-term, as CPI readings across the past few months have undershot the Bank's forecasts. For growth, in order to meet Q2's forecasts of 0.8% for 2012, the UK economy will be required to average quarterly growth of 0.5% across the second half of the year – a highly unlikely prospect. As such, the board are expected to slash their forecasts closer to 0.0% for this year. With this the most likely outcome, this may lay the path for, and justify, another wave of asset purchases from the Monetary Policy Committee in November, a horizon event that many analysts are now forecasting. A key element of the report that will be closely watched is the board's approach to inflation risks, especially in the medium-term. If these are skewed to the downside, this may give markets an insight into the bank's strategy beyond this November, suggesting further easing or intervention further down the line. However, as a caveat, the Bank of England exclude an extreme escalation of the Eurozone crisis in their forecasts, a prospect that becomes more tangible as the weeks go by. As such, the severe European headwinds remain behind the steering wheel in the UK. Elsewhere from the report, any comments regarding the Bank's recent ECTR and Funding For Lending schemes will be closely watched to see if the board consider the activities as a compliment or a substitute to their unconventional quantitative easing policy.
In terms of market reaction, should the report move alongside expectations, the UK asset classes will likely remain unmoved. But, any signalling or indications that the Bank see their ECTR or Funding For Lending schemes as sufficient over and above their quantitative easing program which may lead to immediate GBP strength with a staunch correction in the UK fixed-income asset classes; most likely a sharp pullback in Gilt futures as participants price out the most significant buyer of the security in the market.
Please see the attached link for the previous Quarterly Inflation Report CPI and GDP forecasts released in May 2012:
www.bankofengland.co.uk/publications/Documents/inflationreport/12mayirprob.xls
You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at ransquawk.com/mobile_app for Apple iPhone, Blackberry and Android users.
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Due for release at 1030BST/0430CDT.
Today sees the Bank of England release their Quarterly Inflation Report for Q3, in which markets are expecting the board to have revised lower their GDP and inflation outlooks for the medium-term, as CPI readings across the past few months have undershot the Bank's forecasts. For growth, in order to meet Q2's forecasts of 0.8% for 2012, the UK economy will be required to average quarterly growth of 0.5% across the second half of the year – a highly unlikely prospect. As such, the board are expected to slash their forecasts closer to 0.0% for this year. With this the most likely outcome, this may lay the path for, and justify, another wave of asset purchases from the Monetary Policy Committee in November, a horizon event that many analysts are now forecasting. A key element of the report that will be closely watched is the board's approach to inflation risks, especially in the medium-term. If these are skewed to the downside, this may give markets an insight into the bank's strategy beyond this November, suggesting further easing or intervention further down the line. However, as a caveat, the Bank of England exclude an extreme escalation of the Eurozone crisis in their forecasts, a prospect that becomes more tangible as the weeks go by. As such, the severe European headwinds remain behind the steering wheel in the UK. Elsewhere from the report, any comments regarding the Bank's recent ECTR and Funding For Lending schemes will be closely watched to see if the board consider the activities as a compliment or a substitute to their unconventional quantitative easing policy.
In terms of market reaction, should the report move alongside expectations, the UK asset classes will likely remain unmoved. But, any signalling or indications that the Bank see their ECTR or Funding For Lending schemes as sufficient over and above their quantitative easing program which may lead to immediate GBP strength with a staunch correction in the UK fixed-income asset classes; most likely a sharp pullback in Gilt futures as participants price out the most significant buyer of the security in the market.
Please see the attached link for the previous Quarterly Inflation Report CPI and GDP forecasts released in May 2012:
www.bankofengland.co.uk/publications/Documents/inflationreport/12mayirprob.xls
You can now follow real-time news headlines on the move with the new RANsquawk app available to download for free at ransquawk.com/mobile_app for Apple iPhone, Blackberry and Android users.
View All Market Commentary
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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