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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (17392)	12/2/2004 12:07:07 PM
From: zonder	Read Replies (1) \| Respond to of 116555

[Re rates in UK: I received this from the same guy about two weeks ago. Hope it helps.] The minutes of the November MPC meeting reveal that there was a unanimous vote to keep rates on-hold at 4.75%. There was no discussion of the possibility of raising rates at this meeting. While some will point to some differences of opinion on the MPC - these differences are described as "small". Some analysts are pointing to the stress in the minutes on "risk and uncertainty" surrounding the forecasts which the MPC took from the already-published Inflation Report. However, it is important to look at the Bank's summation of the risk. In other words, the key issue is what CONCLUSION does the Bank come to about these risks and uncertainties - are the risks to the inflation and economic growth outlooks to the downside or the upside? There is an unequivocal answer to this very important question. Take for example the uncertainties about the outlook for house prices. The minutes come to this conclusion. "Overall, the risks from the hosuing market to GDP growth and CPI inflation were on the DOWNSIDE." If that is not clear enough for the markets, the minutes come to the following summary conclusion. "Overall, the Committee's best judgement was that the risks to the central projections for both GDP growth and inflation were on the DOWNSIDE." One feature of the minutes which appears to have been unfairly overlooked by the markets is another admission from the Bank that they have been consistently overestimating the trajectory of CPI inflation in their previous forecasts. The minutes note that, "CPI inflation had fallen to 1.1% in September from 1.3% in August. This was SIGNIFICANTLY LOWER than the Committee's central expectation earlier in the year." Conclusion: These minutes reinforce the somewhat dovish tone of both the latest Inflation Report and Mervyn King's statements at the press conference launching that report on the 10th. of November. Rates are firmly on-hold for some months to come and the balance of risk suggests that the next move may well be down rather than up.