FXStreet (Guatemala) – Analysts at Brown Brothers Harriman explained that Weale’s comments were quite pointed, suggesting he is inclined to support a rate hike as early as August.
Key quotes:
“Weale tilts toward the hawkish side, and this would not be the first time he was out in front of the MPC. Since joining the MPC in 2010, he has dissented around a dozen time only to retreat.
“What is different this time is that UK economy continues to absorb slack and the labor market is approaching what economists generally regard as full employment. There are a number of economists that have begun talking about the first BOE hike in the middle of Q4. The implied yield of the December short-sterling futures contract has risen 11 bp over the past couple of weeks. It now implies a 3-month yield of 78 bp, which is about 21 bp higher than 3-month LIBOR and 28 bp above the bank rate.”
“The rise of sterling on a broad trade weighted basis of around 7.5% this year imparts a tightening impulse. Feed through from the trade-weighted developments to the UK economy is faster and more significant for the UK than the US. In addition, because US home owners mostly have fix rate mortgages, Americans are less exposed to a rate hike than UK homeowners where the variable rate mortgages adjust quickly.”
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