FLASH: UR fall tightens hawkish pressure
- The LFS unemployment rate declined another tenth to 4.5%, taking it to the BoE’s estimate of the NAIRU and making the MPC’s trade-off uncomfortable.
- Demand growth remains weak and this should discourage a response in August, consistent with recent guidance. However, with the Brexit-related devaluation looking increasingly like a supply shock, a hawkish response is building.
- I continue to expect the first BoE rate hike in May 2018 and also contrary to the consensus, I see this as the start of a slow hiking cycle rather than one and done.
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