BoE in a position to hike? - Nomura

Analysts at Nomura explained that this week’s UK economic data releases confirmed a further rise in inflation to 3% and simultaneously an improvement in average earnings growth. 

Key Quotes:

"Despite the latter, real earnings are falling on an annual basis. They are likely to continue to drop only in the very near term, however, with inflation expected to peak soon then decline, and earnings growth is set to pick up further as we move into 2018.

The big question of our client survey was whether an upcoming MPC hike would be a policy mistake or not: 42% said it would be, 58% said it wouldn’t. 42% is still a sizeable amount of investors. 

The flows resulting from the decision are unlikely to be all one-way and could complicate the flow picture in the early days of the hiking cycle. Of those who believe it to be a policy mistake, “they have boxed themselves into a corner” and “25bp rate hike is simply not needed” were the two most common responses, while “Brexit talk breakdown, collapsing inflation next year, no wage growth, no productivity, job losses to come” featured from others."