BOE PREVIEW: Discussion on Rate Cuts, Muted Wage Growth Seen Key
(Bloomberg) -- BOE minutes will be scoured for any discussion on rate cuts as analysts and investors say the chance of more easing has increased.
- The U.K.’s rate-setters will leave rates unchanged and it’s still too early for the doves to vote for looser policy, analysts say
- BOE decision due 12pm GMT
- CITIGROUP (Josh O’Byrne)
- Don’t expect much change in the language; expect a 9-0 vote to leave rates unchanged
- There’s a risk of a dovish slant to the minutes as data has been disappointing, making GBP a better short, especially vs Scandinavian currencies
- Likely still too early for Haldane or Vlieghe to vote for a rate cut but risk will rise if employment softens
- While sterling’s weakness is positive for inflation, MPC may shrug it off as it reflects perceived risks to growth
- GOLDMAN SACHS (Andrew Benito)
- Expect minutes to be significantly more dovish than in February
- Given weaker U.K. data may reflect the upcoming referendum on EU membership, BOE may avoid a strong policy message until the vote but emphasize policy flexibility
- Expect rates to rise in 4Q 2016 but only if credit spread-widening reverses
- Likelihood of a targeted credit easing policy or a rate cut has increased
- BARCLAYS
- Expect the policy stance and the split of the vote to remain unchanged
- While dovish member Gertjan Vlieghe spoke recently about what may induce him to vote for a cut in the bank rate, don’t see this as a risk at present as an insufficient amount of data has come out to justify such action
- Minutes will likely echo recent dovish comments by MPC members; look for further comments relating to the labor market puzzle and persistent muted wage growth pressures
- JPMORGAN
- Vote seen at 9-0
- The tone of the minutes will continue to suggest no urgency to hike rates
- BOFAML
- The BOE is sidelined by events out of its control for now: global and Brexit uncertainty
- The key question is how extensive the discussion of rates cuts was
- GBP will remain ambivalent to U.K. data and the rate cycle until the uncertainty of the EU referendum has passed
- Expect rates to rise in November
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Andrew Benito (Goldman Sachs International)
Josh O'Byrne (Citigroup Inc)
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