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from MacroScope:

The perils of predicting BoE policy

BRITAIN/As we’ve noted extensively, economists often get it wrong. Leaving aside their collective failure to recognise an impending global recession, you might recall a shock interest rate hike from the Bank of England in January 2007.

This was another event that almost every economist polled by Reuters failed to spot, and there are signs that four years on, economists might be setting themselves up for a similar shock.

The consensus from the last Reuters BoE poll last week showed interest rates would stay on hold into the fourth quarter, even though UK money markets have priced in a 100 percent chance of a rate hike by May. Since the January meeting, some of the bank’s Monetary Policy Committee members have publicly stated their determination to fight strong inflation.

But going back to January 2007, the only analyst out of the 50 polled by Reuters who predicted that shock rate hike was Simon Ward, chief economist at Henderson Global Investors. If the MPC does indeed flay analysts’ consensus this year by hiking rates before April, he stands to repeat his 2007 feat by being the only economist in the last poll to forecast a hike in the first quarter.

from MacroScope:

Economists vs the zero barrier

USA-FED/Anyone involved in financial markets on a day-to-day basis will be familiar with bits of jargon like “breaking the psychological barrier”, “passing key resistance levels,” and even “magic numbers”.

While academics might argue if such things exist, market players put a lot of weight (and money) on the way certain financial instruments, indexes and currencies seem to behave near a certain number – usually a round figure.

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