• Spare capacity is key for BoE policy makers: by Q4-2014, less slack in the labour market should trigger concerns over the medium-term inflation outlook
• We expect a measured hiking path equivalent to 25bps each quarter from Q1-2015 through 2016
The BoE drops its unemployment threshold and is now focusing on spare capacity and productivity
• Economic slack could be eliminated by early 2015, with unemployment reaching equilibrium by late 2014
• We revise up our 2014-15 GDP forecast, cut 20...
GDP growth is strong, but faster productivity growth should delay BoE rate hikes until 2016
• Supply-side constraints and higher CPI expectations are the key risks around the BoE’s rate trajectory
• FX – The GBP is starting to look vulnerable to...
The BoE’s 7% unemployment rate threshold is an ‘easily understood’ measure of slack in the economy
• We revise up our GDP growth forecast, but see inflation low by 2015 and push rate hikes to H2-2016
• FX: GBP will now be more sensitive to UK empl...
GBP weakness has accelerated in recent weeks as UK fundamentals continue to deteriorate
• We expect additional easing from the BoE to weigh further on GBP while fiscal pressures build
• We have lowered our GBP forecasts and downgraded our medium-t...
The BoE warns that the UK faces above-target inflation and weak growth for a prolonged period
• Further policy easing looks likely to be delayed until the new governor takes over in Q3-2013
• Alternatives to QE may be favoured; there appears to b...
• As governor of the Bank of England from July 2013, Mark Carney is likely to face ongoing challenges
• UK rates look set to stay on hold long after the BoC starts to hike; we expect more QE will be needed
• FX – Expected policy continuity at both...
Top 3 data/events
• China – Slow loan growth, but the cost of financing is falling
• Taiwan – Leading indicators index likely to drop
• Thailand – Manufacturing production and trade to recover
• Our call for reducing FX beta, raisi...
Top 3 key events and data
• New Zealand – Rates to remain on hold
• Singapore – March industrial production likely to have fallen into negative territory
• South Korea – Q1 GDP likely to have accelerated on a q/q basis
• Bernanke i...
Top 3 key events and data
• Euro area – Focus on debt auctions in Spain and Italy
• UK – GDP data to show the economy avoided another negative quarter in Q1-2012
• US – Housing market remains uninspiring
• China’s slowdown to weigh...
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This report provides an economic outlook for more than 60 economies worldwide and investment implications for commodities, credit, equities, FX and interest rates markets in 2014. We expect a better 2014, with world economic growth picking up and inflation staying benign. Global growth should increase to 3.5% in 2014 from 2.7% in 2013, helped by improvements in economic activity in the US and Europe. A pick-up in growth in the West is good news for the rest of the world, and we expect emerging economies’ growth to outpace G7 growth by almost 4 percentage points.
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