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12 Nov 2014
BoE Quarterly Inflation Report: demand concerns
FXStreet (London) - The Bank of England this morning has released its Quarterly Inflation Report.
On demand and supply concerns:
“The global outlook has weakened since August. In the euro area, the United Kingdom’s largest trading partner, output grew only modestly in the first half of 2014. More timely survey indicators of activity and consumer and business confidence are consistent with continuing subdued growth. Growth has also slowed in some emerging economies, including China. Although US GDP grew solidly in Q3, household consumption growth remained subdued.
Partly reflecting weaker external demand, UK exports fell in Q2 and surveys of export orders paint a less positive picture of the near-term outlook than three months ago.
Disappointing news on global activity was associated with some declines in risky asset prices, with financial markets exhibiting pronounced volatility during October. The FTSE All-Share is around 5% lower than in August and spreads on riskier corporate bonds have risen by 70 basis points on average. It is also possible that investors are now demanding greater compensation for holding some riskier assets.
Market participants’ expectations for interest rates in three years’ time have also fallen notably since August in some advanced economies — for example, by around 60 basis points in the United Kingdom and around 40 basis points in the United States. In the United Kingdom, rates are now expected to remain below 2% over the next three years.”
On demand and supply concerns:
“The global outlook has weakened since August. In the euro area, the United Kingdom’s largest trading partner, output grew only modestly in the first half of 2014. More timely survey indicators of activity and consumer and business confidence are consistent with continuing subdued growth. Growth has also slowed in some emerging economies, including China. Although US GDP grew solidly in Q3, household consumption growth remained subdued.
Partly reflecting weaker external demand, UK exports fell in Q2 and surveys of export orders paint a less positive picture of the near-term outlook than three months ago.
Disappointing news on global activity was associated with some declines in risky asset prices, with financial markets exhibiting pronounced volatility during October. The FTSE All-Share is around 5% lower than in August and spreads on riskier corporate bonds have risen by 70 basis points on average. It is also possible that investors are now demanding greater compensation for holding some riskier assets.
Market participants’ expectations for interest rates in three years’ time have also fallen notably since August in some advanced economies — for example, by around 60 basis points in the United Kingdom and around 40 basis points in the United States. In the United Kingdom, rates are now expected to remain below 2% over the next three years.”