Follow Paul Donovan

Time to tighten?

| Tags: Paul Donovan

  • Bank of England governor Carney, defender of forward guidance of forward guidance, yesterday offered some forward guidance by suggesting rates would rise earlier than the market expects (which has long been the UBS view - we see a February 2015 rise).
  • Perhaps more interesting, if less dramatic, was the UK government moving to allow the Bank powers to regulate mortgage provision. This could be a return to monetary policy being conducted by interest rates and financial regulation in tandem, rather than by interest rates alone.
  • Euro area inflation is due, with the market looking for a 0.5% yoy rate in May. The disinflation forces in Europe are disproportionately focused on flexible prices, and on import prices, and as such disinflation could turn to inflation in a very short period of time.
  • The US throws out Michigan consumer confidence, which is expected to rebound from a weaker May reading (the high frequency data supports a strengthening this month). Chinese production and retail sales data, for what it is worth, was broadly as expected (maybe a little stronger).

Listen to the audio version of this briefing.