Archived IMT (2011.01.26)

MERVYN KINGs SPEECH on INFLATION indicated the BoE governor is no rush to raise rates. Here is the UPDATED CHART on the Gilt/Treasury yield spread the chart from Sunday's workshop http://bit.ly/fl4EW9 The H&S formation remains intact (as seen in the left chart). King said: With the standard rate of VAT rising to 20% this month, and recent further increases in world commodity and energy prices, inflation is likely to rise to somewhere between 4% and 5% over the next few months, before falling back next year. He mentions dismal recovery in private consumption, deep fiscal consolidation, high debt levels and high interest rates to homebuyers. We may see prolonged buying in US equities during the Wednesday session before profit-taking ensues after the FOMC decision, which could drive up bond yields on an improved outlook signalled by the Fed.