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November 2013 Inflation Report & Press Conference

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Starts at 10.30am and will be streamed live at the link below:

http://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=117-118-13642&target=en-default-&status=preview&browser=ns-0-0-0-11-0&stream=flash-video-400

CPI annual inflation rate fell to 2.2% in October, but this morning's labour statistics release shows the unemployment rate has dropped to 7.6%, moving that little bit closer to the 7% mark.

Average annual earnings growth remains at just 0.7%.

UnemploymentRateSep13.gif

http://www.ons.gov.uk/ons/dcp171778_332467.pdf

Edited by FreeTrader

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Starts at 10.30am and will be streamed live at the link below:

http://streamstudio.world-television.com/CCUIv3/frameset.aspx?ticket=117-118-13642&target=en-default-&status=preview&browser=ns-0-0-0-11-0&stream=flash-video-400

CPI annual inflation rate fell to 2.2% in October, but this morning's labour statistics release shows the unemployment rate has dropped to 7.6%, moving that little bit closer to the 7% mark.

Average annual earnings growth remains at just 0.7%.

UnemploymentRateSep13.gif

http://www.ons.gov.uk/ons/dcp171778_332467.pdf

The Beeb radio news I listened to used a tone which suggested that 0.7% increase in wages was a decent chunk. Unbelievable.

Will be interesting to see what comes out of this press conference on the forward guidance front.

Edit here's a link to the BoE page for the Inflation report:

http://www.bankofengland.co.uk/publications/Pages/inflationreport/2013/ir1304.aspx

Edited by The B.L.T.

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Carney emphasised that when unemployment reaches 75 it is not a signal that IRs will be raised but that they will then start to think about raising them.

However, the figures he gave was that it could be around the end of 2014 that they start thinking about doing so - which has been brought forward from 2016.

He talked a lot about the importance of seeing increased spending on goods and housing.

So it looks like a green light to ramp house prices, trying to get more people to buy houses.

Presumably, because he has basically said that an IR rise will not even be on the table for 12 months it is also a green light for the FTSE?

Edit: Although no immediately reaction from the FTSE.

Edited by The Masked Tulip

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Good link.

I will lol if the gov starts reverting the classifications that make the 7.6 unemployment - to prevent the 7.0 trigger for considering rate rises.

All those people successive governments have spent years getting reclassed as not technically unemployed - now start being classed as unemployed again.

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Good link.

I will lol if the gov starts reverting the classifications that make the 7.6 unemployment - to prevent the 7.0 trigger for considering rate rises.

All those people successive governments have spent years getting reclassed as not technically unemployed - now start being classed as unemployed again.

I doubt if he'll need to. The economy will be slowing again in the New Year - unexpectedly, of course! - as the credit impulse from HTB1 wears off and the global depression becomes more entrenched. Only the Chinese can save us...

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Basic message:

While the unemployment rate remains above 7% we won't be tightening policy.

If the unemployment rate falls to 7% or below, we still won't be tightening policy.

They've managed to talk the gilt yield back down.

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Basic message:

While the unemployment rate remains above 7% we won't be tightening policy.

If the unemployment rate falls to 7% or below, we still won't be tightening policy.

They've managed to talk the gilt yield back down.

Pound is up a teeny bit.

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Quick paraphrase of some Carney answers on property situation:

Must put housing pickup in to perspective

At 2/3 of historic activity

Still room for it to pick up

"do you see any regions with bubble, London dinner parties prime real-estate biggest topic"

We don't make policy at BOE just for London

Clearly areas where valuations elevated and increasing, seeing across UK greatest momentum at upper end of valuations - credit constraints at lower valuations

Good line of sight to dynamics in housing - do look at momentum and leverage in realtime informed by LTV, affordability

Vigilant, analyse potential risks to stability, access to broad range of tools to use in proportionate fashion

Housing important part of recovery, already laid out direct/indirect outlook in inflation

MPC/FPC share analysis to ensure focused on core mandate

"do you see help on supply as impact on pricing, high prices draining consumer ability to spend?"

We have pickup in activity, no influence on supply

On national basis seeing no wealth effect, not seeing sellers spending any of it

However, if houses worth more people can borrow more to spend

As housing activity picks up it adds directly to grow

Can be misinterpreted as wealth effect, expectations of future earnings has more impact, need those expectations to be validated by productivity picking up etc.

"more on housing"

Levels in housing investment stronger, bounce back in new homes

Housing important contributor at moment and next several quarters, balances out over forecast horizon

Only contributes 5% GDP, jumping back at moment, but don't expect constant acceleration

"some abiguity on htb, clarify if you can end it"

Will make clearer later how we'll act

Must guard against risks in financial stability

From that perspect may provide advice / recommendations if it contributes to financial stability risk - min underwriting standards, LTV ratio type recommendations, could give gov advice on tax policy to contribute to constructive evolution of housing market

Chancellor indicated he will ask for that advice each HTB anniversary

Re overall risk in housing, still early days, analysing situation, broad range of tools to contribute to sustainable evolution

E&OE

Edited by slacker

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Carney asked whether rising housing costs might reduce demand for other things e.g. as people save for bigger deposits.

Answer: mumble mumble wealth effect mumble mumble

There was an awkward silence in the room as the journalists clearly realised the question hadn't been answered at all. Sensing this, Carney clumsily resumed his answer with a bit more mumbling, then it all moved on.

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U.K. stocks slump on BOE rate-hike fears is how Marketwatch is reporting this.

I find this odd - FTSE is indeed down - as he basically said he will not even think about raising IRs until the end of 2014... so, presumably, the markets do not believe him?

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Why does nobody ever ask him if he is just a debt junkie and his legacy in Canada, comparing Canadian against US household debt?

They wouldn't be invited back to the BOE for tea, biscuits and one of his chats.

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U.K. stocks slump on BOE rate-hike fears is how Marketwatch is reporting this.

I find this odd - FTSE is indeed down - as he basically said he will not even think about raising IRs until the end of 2014... so, presumably, the markets do not believe him?

Before their forecast today unemployment was not going to get down to 7% until mid-2016.

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Before their forecast today unemployment was not going to get down to 7% until mid-2016.

Yep, which is why I think Carney went to great lengths today to emphasise that 7% was not a line in the sand that meant IRs would rise and that he would only begin to think about raising IRs when 7% was reached.

I got the impression - which is what most of us have long suspected - that his plan is basically ultra low IRs and QE to create a housing/spending bubble and an illusion of recovery... but that he is now worried that things are actually getting better and that he will be forced to raise IRs sooner.

I suspect he and Osborne will refuse to do so even if the coming months bring a much improved economy.

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Nice to see gdp and cpi projection side by side. Lots of growth with no no cpi inflation effect. Some commentators have said that the have their spare capacity assumptions are wrong. Personally I think the cpi calc is the problem but its not relevant to the interest rate decision.

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“Without forward guidance, this would have been a very ‘dovish’ Inflation Report from the Bank of England, but we are now dealing with a central bank with two key policy pillars (CPI and unemployment), and markets have focused strongly on the latter. As such, the bank has shot itself in the foot,” said Simon Smith, chief economist at FxPro in London.

http://www.marketwatch.com/story/pound-falls-ahead-of-quarterly-inflation-report-2013-11-13?link=MW_home_latest_news

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Amazing to hear him talking about "the Great Moderation" as if everything was absolutely fine in the early-mid 2000s and 2008 was a completely random event which came out of nowhere.

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By Europe do they include the UK I wonder?

(Reuters) - The threat of deflation in the euro zone could reverse a major investment trend of 2013, drawing funds out of stocks and into government bonds and cash.

Europe is still some way from a negative inflation rate, let alone a Japanese-style deflationary spiral - the policymakers' nightmare in which falling prices weaken demand, leading to wage cuts and even lower prices.

But a warning light is already flashing, with euro zone inflation registering a shock drop last month that prompted an interest rate cut.

This year's "Great Rotation" flows away from bonds have propelled many stock markets to multi-year or record highs and fuelled a rally in property and other relatively high-yielding assets.

But it's a potential money loser in an environment of weak inflation or even outright price declines. With chronic price falls, investors become ultra-risk averse.

http://www.reuters.com/article/2013/11/13/us-investment-deflation-analysis-idUSBRE9AC06720131113

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Yep, which is why I think Carney went to great lengths today to emphasise that 7% was not a line in the sand that meant IRs would rise and that he would only begin to think about raising IRs when 7% was reached.

I got the impression - which is what most of us have long suspected - that his plan is basically ultra low IRs and QE to create a housing/spending bubble and an illusion of recovery... but that he is now worried that things are actually getting better and that he will be forced to raise IRs sooner.

I suspect he and Osborne will refuse to do so even if the coming months bring a much improved economy.

I've been saying this for weeks on here.

George Osborne came too soon.

Fact.

Oh, and don't forget to vote Labour to crash this ******* to the ground.

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I think it is 100% guaranteed. They will come up with some other excuse or reason.

Yes.

We need an "event" to remove this power over IRs from their desperate, sweaty, grip......

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