U.K. Inflation Still Hot Topic with Bank of England

The focusthis morning will be on the Bank of England policy decision. Expectations arefor the BoE to leave its benchmark interest rate unchanged at 0.50%.

The focusthis morning will be on the Bank of England policy decision. Expectations arefor the BoE to leave its benchmark interest rate unchanged at 0.50%.

The BoE’sMonetary Policy Committee discussion is going to focus on surging inflationarypressure and slowing growth. Inflation is soaring well above its 2% medium-termtarget but financial austerity measures have hurt prospects for economicgrowth.

Theconsensus is calling for the BoE to begin hiking interest rates during thefirst quarter of 2011. Expectations for a sooner-than-expected rate hike roserecently after the January Monetary Policy Committee minutes revealed thatMartin Weale joined Andrew Sentence in calling for a rate hike. Sentence hadbeen the lone dissenter since June in calling for a quarter-point hike.

The U.K.inflation rate is currently at 3.7% and is expected to top out near 4.0%. TheBoE is fairly confident that excess capacity will help push inflation backtoward the 2.0% benchmark. The conclusion is the BoE would love to beginraising interest rates now to assure that inflation will be tamed, but BoEmembers fear they will hurt growth and damage consumer confidence if they hiketoo soon. In addition, hiking rates at the same time new financial austeritymeasures kick in could damage the prospects for growth which already took a0.5% hit in the final quarter of 2010 when it was reported that British grossdomestic product unexpectedly contracted.

Technicallythe main trend is up but profit-taking and position paring has pushed theBritish Pound into an uptrending Gann angle at 1.5985. A failure to hold thislevel could lead to an acceleration to the downside which could mean animminent break into the major retracement zone at 1.5811 to 1.5701

For furtherinformation on this and other Pattern, Price & Time products visit ourwebsite at www.patternpricetime.com

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

Disclainer: