PMI in the service sector in Britain threw one more reason to doubt the decrease in activity, showing a jump to 54.5 against 49.7 a month earlier. However, we must consider such a jump with an eye to a sharp slowdown in December because of snow, which caused the fall of the index below the 50 mark for the first time since April. Mark-It, which publish these data indicate that the combination of production data and services meet the GDP growth of 0,4%.Nevertheless, the market nervously adjusted for the planned meeting next week, the monetary committee. Historically, about half of the action were made in one month with the quarterly report on inflation (in February it will be). Given this, now is the time when the Committee would prefer to see the bigger picture with regard to inflation forecasts. Furthermore, with two committee members voting for a rate increase in January (when the inflation data were available to them, but on GDP - no), it seems that the prospects of tightening will be incredibly sharp discussed.
Another key point that should be noted - a distrust towards the first estimate of GDP and with respect to various polls. It should be noted that skepticism is not always justified by subsequent revisions, but the first estimate is based on only 40% of the available data, and they are right, when such data is commensurate with the short-term indicators of assets.
Markets are now close to having to take full account of the debt markets tightening in May. There is a risk (30%) already tightening next week, but the position of King defends Bank and reiterates that inflation is still subject to short-term factors that will soon cease to have effect. As shown by the minutes of the Bank a couple of weeks ago, joining the camp of the hawks of another member, can further shift the balance in the next month or two.
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