BOE CHECKLIST: What to Look for in Minutes, Inflation Report
(Bloomberg) -- The BOE will simultaneously publish its rate decision and minutes at noon London time. Governor Mark Carney will hold a press conference 30 minutes later.
- Bloomberg Intelligence’s Dan Hanson says the central bank is likely to raise its projections for economic growth and predict a larger inflation overshoot; see preview here
- Key questions include:
DID THE BOE CUT RATES, EASE FURTHER?
- The bank had indicated there was still a chance of further easing in its September minutes; as recently as mid-October, analysts in a Bloomberg survey expected a cut in rates to 0.10%
- That was before the much stronger-than-forecast 3Q GDP data
- Analysts no longer expect any easing this month; Goldman pushed back its BOE rate-cut call to Feb. from Nov. and HSBC no longer expects the bank to cut rates this month
HOW SPLIT WAS THE VOTE?
- Analysts surveyed by Bloomberg expect an 9-0 vote to leave rates unchanged
WHAT DID THE MPC SAY ABOUT BREXIT?
- Governor Mark Carney said this week he will stay in office for a year longer after his term ends in 2018 to guide the economy through Britain’s split from the EU
- Early last month, Deputy Governor Ben Broadbent said the effect of a lack of clarity about the U.K.’s future trading relationships is likely to be insidious as “decisions to expand, that might otherwise have been taken, are delayed”
WHAT CARNEY SAYS ABOUT THE DIRECTION OF THE NEXT RATE MOVE?
- Money markets are pricing about 30% chance of a 10bps rate cut in the early part of 2017; pricing for a 10bps rate hike in late 2017 has faded, having jumped to around 50/50 after better GDP data last week
WHAT DOES THE BANK SAY ABOUT STERLING ?
- GBP is trading about 6% lower than at the time of the last Inflation Report, when the pound had already fallen sharply
- This time around, people will be looking for any clue on how the Bank would respond to further pound decline as analysts say a hard Brexit could see further weakness
- Carney last month said the central bank isn’t indifferent to the pound’s slide
WHERE DOES THE BANK SEE INFLATION IN 2 YEARS AND IN 3 YEARS?
- The weaker pound means the BOE will likely raise its inflation forecasts, expecting an even larger overshoot
- On Oct. 14, MPC member Kristin Forbes said the days of inflation bouncing around zero are gone, while economists at Niesr said inflation could peak at around 4% in 2H 2017
ANY CLARITY ON WHETHER BANK WILL LOOK THROUGH HIGHER INFLATION?
- Mark Carney told a House of Lords Committee in London that there are limits to the MPC’s willingness to look through an overshoot of inflation
AND WHAT ABOUT GROWTH?
- In its August Inflation Report, the BOE said available evidence suggested growth would slow to 0.1% in 3Q; by the time of the September meeting, these projections were revised to “0.3% in the mature data and for 0.2% in the preliminary release”
- Preliminary data though showed growth of 0.5%, spurring analyst to expect the bank to lift forecasts at today’s meeting
- The MPC’s Michael Saunders said Oct. 4, GDP is likely to grow more than 1% in 2017, compared with the BOE’s prediction of 0.8% growth in its August Inflation Report
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Mark Carney (Bank of England)
Benjamin Broadbent (Bank of England)
Kristin Forbes (Bank of England)
Michael Saunders (Bank of England)
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