Inflation may be far off target but economists are convinced the United States Federal Reserve and the Bank of England will soon begin raising rates from near zero – with the Fed poised to act as soon as Thursday.
The U.S. and British central banks are scrambling to be the first of the majors to raise interest rates after a long period of unprecedented monetary generosity. It won’t happen immediately but both Janet Yellen, who chairs the U.S. Federal Reserve, and Bank of England Governor Mark Carney say there will be a hike this year (Yellen) or around the end of the year (Carney). Might this be a bit of a rush? Not everything in the world economy is as sanguine as the U.S. and British economies purport to be.
After years of defying gravity and outperforming the rest of Europe, Britain’s job market looks like it might be slowing down.
British wage growth will outstrip the Bank of England’s forecast this year but that doesn’t mean the first rate hike will come sooner.
We’ve been told for years that a meaningful pickup in wages – usually the primary driver of domestic inflation – was required to set the stage for interest rate hikes both in the UK and the U.S.
One way or another, the end game for Greece approaches.
Last night, Greek Prime Minister Alexis Tsipras left talks with senior EU officials in Brussels saying a deal with creditors was “within sight” and that Athens would make a payment due to the IMF on Friday.
We all now know by now that British inflation has dipped to slightly less than zero, its weakest since 1960. Much of the recent weakness is down to the same reason inflation is so low in the euro zone, Britain’s main trading partner: the collapse in the price of oil.
Greece’s European lenders have played down hopes of a swift end to aid negotiations and said talks must speed up before the country runs out of cash. That contrasted sharply with optimism in Athens where a series of top officials asserted that a deal was just days away.
Euro zone inflation rose to zero in April from -0.1 percent and in Britain it fell to -0.1 percent from zero, the first negative reading since the 1960s.