BoE’s lift-off likely in Q2 2016

UK's unemployment rate and wage growth were according to the expectations. Healthy growth momentum is seen in UK economy and labor market also improved noticeably.

UK labor market continues to tighten as signaled by the labor market figures. Wages excluding bonuses is now up to 2.5% yoy, higher compared to the beginning of this year.

Upward pressure can be thus seen on wages. Nevertheless, due to dovish November inflation  report, in which BoE revised down its inflation forecast, there are changes in the market expectations as well.

"We now see a first rate hike in Q2 2016. Our previous forecast was Q1 2016. Rates will be lifted gradually, reaching 2.25% by end-2017. Markets currently expect a first rate hike in Q3 2016", says Nordea Bank in a research note.