We revise our Fed forecast: we now believe that the central bank will hold rates steady in September and instead announce a plan to reduce its balance sheet at the meeting. In June this year, the Fed published a plan for quantitative tightening. Balance sheet reductions are not intended to play an active role in mone-tary policy during normal times. The Fed's intention is that they should run quietly in the background for years, while monetary policy is operated through adjustments of the federal funds rate.
Unemployment rate falls further, to 4.4%; wage growth up to 2.1%Today’s labour market numbers were largely in line with the Bank of England’s (BoE) expectation. The unemployment rate for the three months to June fell to 4.4 percent, from 4.5 percent in May. The consensus expectation was for the unemployment rate to stay unchanged, at 4.5 percent. Average weekly earnings, both total pay and regular pay (excluding bonuses), increased by 2.
- CPI unchanged at 2.6% (consensus: 2.7%) and core CPI unchanged at 2.4% (consensus: 2.5%)
- Cost pressures high but abating; both PPI input and output inflation fell further
- The BoE expects inflation to increase a little further and reach its peak before year-end
- Inflation in July rose far above the Riksbank forecast, mainly owing to temporary factors
- Underlying inflation still judged to be below inflation target; upward trend modest
- No change to our Riksbank expectations; rate increase in April 2018
- Gradual growth slowdown continues
- Only bright spot in July: Infrastructure investments
- We raise our GDP forecast