The Bank of England is under no pressure to do nothing other
than sit on its hands on rates and further quantitative easing for quite a
significant time. It looks like the implied forward guidance for no rate hikes
until 2016 remains intact. The economy has got a better spring in its step, but
the recovery still carries a sizeable limp from the recent twin recessions. The
economy will still take some significant nursing and nurturing with rates held
steady at 0.5% for a long while. There is no threat of any potential circuit
breakers for higher rates. The only aspect that the BOE will need to pay some
attention to might be possible overheating in the housing recovery, but this is
still in its infancy with no guarantee of sustainability. The housing market is
simply expressing a rebound from five years of stagnation. For the time being,
Carney and the MPC would be best advised to stick to fence-sitting and wait and
see.
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