3 Numbers To Watch: BoE Minutes, UK jobs, FOMC
• Personnel changes at Bank of England
• UK jobs data update due
• Yellen today's star turn
Central banks will drive much of the macro news today, starting with the release of minutes for the Bank of England’s recent policy meeting. Later, Janet Yellen will preside at her first press conference on monetary matters as chairman. This follows the publication of a Federal Open Market Committee (FOMC) statement and a new set of economic projections. We’ll also see an update on UK jobs data in today’s monthly labour market report.
Bank of England Monetary Policy Committee Minutes (09.30 GMT): The central bank yesterday announced the appointments of new deputy governors — personnel changes that some have labelled "a radical shake-up". The London Evening Standard newspaper described the news as "a major overhaul" of the bank's leadership.
The UK is seeing encouraging signs in the jobs market. Photo: Jeff J Mitchell / Getty
With a partially revised lineup of names for the Monetary Policy Committee (MPC), the market-moving potential is somewhat diminished for today’s release of the minutes from the last meeting. Suddenly, there's something new to focus on: how will the new appointees change policy, if at all? Nonetheless, the crowd will still pay close attention to today's transcript in search of any clue for how the Bank of England (BoE) plans to carry out policy at a time when the UK economy is showing considerable growth momentum while interest rates remain at record lows. "Everyone wants to know exactly when you're going to do something," BoE Governor Mark Carney recently told The Wall Street Journal. "We can't tell them something we don't know ourselves. We're not going to raise interest rates until the economy can really sustain it."
Carney has made it clear that he thinks there’s still too much slack in the UK, and so the probability of a rate hike is close to nil for the immediate future. As if to emphasise the point, the BoE last month announced that it would look to a range of indicators beyond the unemployment rate as a guide on the timing for tightening monetary policy. Some analysts have interpreted the change as a sign that the bank is planning on remaining dovish for longer than was previously expected. Maybe, although at the end of last month, the external MPC member Martin Weale advised that rates may rise sooner than some people think, if the labour market shows signs of pushing up inflation. For the moment, that’s not a risk. The annual rate of consumer price inflation is slightly below the BoE’s two percent target — the lowest pace in more than two years. If that’s about to change, we may see a clue in today’s monthly labour market update, which will be released simultaneously with the MPC minutes.
UK Labour Market Report (09.30 GMT): The UK is still on track to be the growth leader among the world’s developed market economies, according to a new Reuters poll. "The story on the UK remains very positive, with business surveys pointing to robust activity, confidence indicators bouncing strongly, credit growth strengthening and asset prices rising," says ING’s James Knightley.
At least one scientist thinks that positive momentum is set to spill over into the labour market in a more convincing degree in the form of higher real wages. The University of Glasgow economist Jo Armstrong predicts that the combination of employment growth and muted inflation will create conditions that will lead to increases in wages above the cost-of-living growth rate.
Last week’s monthly update of the Recruitment and Employment Confederation (REC)/KMPG Report On Jobs also points to improving conditions in the labour market. “This month’s figures show the second highest-ever results in permanent placements since Report on Jobs began in 1997,” says REC’s CEO Kevin Green. “The positive trend of rising vacancies continues and this is supported by our Jobs Outlook data on employers’ hiring intentions that shows businesses will be taking on more workers in 2014 as their confidence grows.”
Not surprisingly, the market is looking for another encouraging release in today’s official employment data. Although the consensus forecast sees unemployment unchanged at 7.2 percent, the claimant count — a key leading indicator— is expected to post another healthy decline of 25,000. That’s a slightly slower drop vs. the previous decrease of 27,600, but today's project fall is still strong enough to support the outlook for a robust recovery in Britain. There’s ongoing concern that growth is overly dependent on what some say is an overheating housing market. However, such worries will take a back seat for at least a day if today’s report tells us that the employment trend is continuing to improve.
Source: UK Office for National Statistics
US Fed FOMC Announcement & Economic Projections (18.00 GMT): As part of today’s monetary policy announcement, the US Federal Reserve will update its quarterly economic projections. Today is also the chairman Janet Yellen’s first monetary policy press event, which will grab most of the attention. But don’t overlook the numbers, which may be quite revealing about the central bank’s intentions.
As usual, the first order of business with new Fed projections is comparing the estimates with the previous round of data. For instance, in the last batch of forecasts (released on Dec. 18, 2013) the bank made only slight changes to its 2014 GDP outlook by widening the estimate range to 2.8 percent to 3.2 percent from the previous 2.9 percent to 3.1 percent band.
It’ll be interesting to see if the Fed changes its assumptions on GDP and the other key indicators (unemployment and inflation) in today’s release now that the bank has said that it's committed to winding down its bond-buying programme. “We expect [Yellen] to reiterate the FOMC’s stance that the outlook remains positive once weather distortions dissipate, and that the hurdle to change the taper path remains high,” Bank of America Merrill Lynch’s US economist Michelle Meyer advised in a note to clients. However, if that outlook is headed for a revision, we’ll probably see the evidence for a change in the Fed’s assumptions via today’s projections. Keep in mind that the new forecasts will be published 30 minutes before Yellen’s press conference begins at 18.30 GMT.