Phillip Shaw, Chief Economist for Investec, joined Zak Mir and Bill Hubard, Chief Economist for Bullion Capital, on the Tip TV Finance Show to discuss the importance of inflation for both the UK and US in raising rates.
Key Points:
Shaw believed that the process has just begun with the initial rate hike from the Federal Reserve, and the next hike in the US is likely in March once the Fed have had time to see the impacts on the first on the US economy.
In terms of commodities, he outlined a view of a gradual increase over the next few years, but downside risk will remain.
The BoE is not as confident as the Fed over inflation to rise, according to Shaw, who commented that the inflation rate in the UK is just in positive territory, and is a long way off the 2% target. Thus the Bank of England is likely to hold off acting for a while longer and leave monetary policy as it is.
He finished by highlighting that the UK and US have fairly similar economies, and there is often a correlation between rate rises. Shaw concluded that although the UK recovery was not as vigorous as the US economy’s, and the BoE is less confident on inflation than the Fed, he believed the UK won’t be too far behind the US.
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