All in all, our expectations of a rate rise sit at May 16, and think that timeline will see tomorrow stabilise expectations, February’s QIR will signal that it is coming at the next meeting and a rise will happen in May.
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Policymakers voted unanimously to maintain quantitative easing at GBP 375 billion.
CPI inflation is nonetheless expected to remain below 1% until the second half of next year, reflecting the continuing drag from commodity and other imported goods prices.
The central bank also downgraded next year’s GDP growth forecast to 2.5 percent from 2.7 percent.
While the new forecasts still suggest policy makers will have to begin raising the key rate from a record-low 0.5 per cent earlier than investors predict, officials offset this with a warning about risks from emerging markets and weaker inflation.
In the minutes, the Bank said that while momentum in the domestic economy “remains resilient”, the outlook for global growth had weakened since its August inflation report.
Core inflation, which excludes volatile food and energy prices, gained 1.11% year-on-year.
Erlam said: ‘Inflation and growth forecasts are expected to be revised lower today, which shouldn’t come as a surprise given the growing number of headwinds in the global economy, softening United Kingdom data and deflationary pressures coming from overseas.
He said this factor, the fragile global economic recovery and volatility in world financial markets were all downside risks affecting Thailand’s economic recovery.
“The MPC’s objective is to return inflation to target sustainably; that is, without an overshoot once persistent disinflationary forces ultimately wane”.
Risky assets had become less volatile on the month and their price had increased, leading them to become less of a concern. Reflecting that, there is a range of views among MPC members about the balance of risks to inflation relative to the best collective judgement presented in the November Report.
Meanwhile, the Bank published the latest letter from Governor Mark Carney to Chancellor George Osborne explaining why inflation is more than 1% off its 2% target.
Knightley argued the Bank’s stance meant a rate rise in the first quarter of next year now looked less likely, but that a second quarter rise could still be on the cards.
Ian McCafferty will once again vote for a rate increase and there is the possibility that Members Weale or Forbes will join him.
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The main question is whether inflation is likely to be above or below its 2% target in two years’ time (for various reasons, a few sensible, some traditional, the bank’s main “forecast horizon” tends to be two years).
