Interest and exchange rate forecast

Interest and exchange rate forecast

Ready, steady, taper

Economic Analysis

10 January 2014

The US Federal Reserve gave markets an early Christmas present with its decision in December to begin 'tapering' its quantitative easing programme. With last year's government spending cuts out of the way, the US appears primed for a year of strong economic growth, which should support the dollar against sterling.

The big news at home is the significant improvement in the labour market. As the unemployment rate edges ever closer to the Bank of England's 7% forward guidance threshold, we have brought forward our timing of the first interest rate rise. Meanwhile, across the Channel, the European Central Bank remains ready to act should the inflationary environment deteriorate much further.

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