UK BoE ignores Omicron uncertainty to hike rates
Even though Omicron is casting a huge shadow over the UK economy, the BoE today raised Bank Rate to 0.25% signalling a clear change of tack. Shifting from a risk management approach, concerns about a tight labour market and the need to reinforce inflation-fighting credibility are now at the forefront. Despite the change of approach, we still see Omicron as key to the near-term outlook.
What you will learn:
- Though the strength of recent labour market data had fulfilled the criteria set by the MPC for hiking interest rates, the uncertainty caused by the emergence of the Omicron variant seemed to warrant a “waitand-
- If activity holds up, interest rates will rise further in 2022, though it’s
hard to see the fog clearing enough to justify a hike in February.
- But if Omicron proves to be very damaging, the BoE could be forced to reverse course.
Eurozone: ECB minutes indicate that July rate hike is a near-certainty
The minutes from the April ECB meeting confirm the hawkish tilt initiated a few months ago continues to gain momentum. With a majority of the council increasingly concerned about the inflation outlook, this makes an interest rate hike already in July almost certain. This should not come as a surprise, however, as recent developments render hawks' case arguably easier to make.Find Out More
For how long will Japan’s households support bonds and the yen?
Households' financial surpluses sharply increased in 2020 and remained high in 2021 due to the Covid pandemic. Most of the surplus continued to go to cash and deposits, but there was a notable increase in funds going to investment trusts (with a large portion invested in foreign equities) in 2021. Amid rising international yield differentials and a weakening yen, there is market chatter about whether this is the beginning of a structural shift from households' risk-averse investment style?Find Out More