UK PMI’s Will Impact BoE Base Rate Debate by Lloyds TSB

The release of the manufacturing and services PMI’s for March may this week play an important role in shaping expectations about the outcome of the next BoE rate decision on April 10th. We are still of the view that a move in May is more likely due to pressing inflation concerns, but would not dispute that a further rise in Libor rates this week and a disappointing set of PMI data could make the April MPC meeting a much closer call.

The release of the manufacturing and services PMI’s for March may this week play an important role in shaping expectations about the outcome of the next BoE rate decision on April 10th. We are still of the view that a move in May is more likely due to pressing inflation concerns, but would not dispute that a further rise in Libor rates this week and a disappointing set of PMI data could make the April MPC meeting a much closer call.

 

The US labour market has contracted in January and February and anecdotal evidence indicates that more jobs may have been lost in March. The employment report is due on Friday and will be the main focus for global market participants, together with Fed chairman Bernanke’s testimony to Congress on Wednesday.

 

Stronger than forecast business confidence and CPI inflation data from Germany last week hinted at a possible further rise in euro zone CPI Inflation in March, thus accentuating the present dilemma for policy makers at the European Central Bank (ECB). Preliminary euro zone CPI data for March is due on Monday and may force the ECB to step up its anti-inflation rhetoric at a time when the economy continues to show signs of resilient activity.

 

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