Making the case for the hawks...
Bloomberg article on the upcoming meeting where they argue that the hawks will be 'outnumbered' but not 'outgunned'.
The hawks focus will be :
- Tight labor market
- Weakness of productivity growth (pay growth needs to be 3-3.5%, it was 2.8% in Feb)
- August rate hike still on the cards
- Debate to be more balanced than the 7-2 vote split would other wise suggest
- GDP could be revised up (as it was fourth quarter of 2010 when weather was to blame too)
Now unemployment is currently 4.2% and that is an undershoot of the MPC's expectations, so pretty good. An August rate hike should still be on the cards, currently the probability stands at 57%. So, it is 50/50.
Ok, clearly we don't expect rate hikes for this meeting. The probability is about 11% at time of writing. However, an upward revision of Q1 remains a real possibility and is one to look out for when it is released. I have been mentioning on previous occassions about the cold weather we have had in the UK. I was speaking to a guy about construction last weekend and he said that you can't lay concrete in freezing weather , because of the risk of frost getting in and shattering. You sometimes just have to sit the bad weather out.
On the other hand Q2 data may be weak too with consumer woes not helping the BOE hike rates, as previously mentioned by Greg and Justin. This does also show the possibility , which Justin flagged up, of a rate hike being set up for August, but then walked away from...