A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jan 08 2015

Bank of England Keeps Rates on Hold, But for How Long?

ECRI has just updated its U.K. Future Inflation Gauge (UKFIG), which has a good track-record of anticipating cyclical swings in U.K. inflation.

U.K. consumers were gifted an early Christmas present in November when headline consumer price inflation slipped to its lowest reading in 12 years. However, despite the apparent boost to household spending, low inflation has been met with concern among some investors, who fear the risk of delayed purchases in a recovery already showing signs of fading. Indeed, with little pressure from current inflation to raise interest rates, the Bank of England (BoE) chose to keep its policy rate at a historic low at its latest policy meeting. Will the BoE continue to hold off a rate rise, and is deflation likely to threaten the U.K., much like that in the Eurozone?

The latest update to the UKFIG clarifies the outlook for U.K. inflation, offering valuable insight into the timing of any shift in the BoE’s policy stance, and whether low inflation will continue in the U.K.

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