Halister News

(Bloomberg) -- The BOE will publish its rate decision, Quarterly Inflation Report and minutes at 12pm in London. Governor Mark Carney will hold a press conference 30 minutes later.

• To follow Bloomberg’s live blog, click here
• NOTE: For analyst views, see the research roundup
• Key questions include:

DID THE MPC CUT RATES? BY HOW MUCH?

• All but 2 of 52 economists polled by Bloomberg expect the BOE to cut rates today; median est. is for 25bps cut, while 3 see deeper reductions

WHAT ABOUT QE?

• The median forecast is for the MPC to keep the asset purchase facility unchanged at GBP375 for now but there’s a wide spread of views, with the highest estimate at GBP525b
  • Goldman Sachs says as much as half of the GBP100b of extra QE it expects could come from private-sector assets, mostly corporate bonds, while BofAML expects GBP50b of QE split evenly between gilts and corporate bonds
• Market response will depend on any changes to buckets, a shift to a longer program and whether linkers are included as some say is possible
• In corporates, could see some U.K. underperformance if no program is launched today but is unlikely to turn moderate weakness more severe, Commerzbank says

AND THE FLS?

• The scheme is currently scheduled to end in January 2018 but many economists expect it to be extended as it has deemed to be largely successful so far, especially as the alternative of lower rates would squeeze margins more
• It’s also possible the terms of the scheme could be altered to make it more attractive

ANYTHING ELSE?

• M&G macro investment manager Eric Lonergan says we’re entering a pivotal juncture for policy with investors looking for a new approach; today will be a key test of whether Carney is on board or remains wedded to more conventional measures
• Options could include tiered rates or helicopter money agreed with the Treasury to fund infrastructure spending

HOW SPLIT WERE THE VOTES?

• Following a sharp contraction in PMI data after the U.K. voted to leave the EU, Martin Weale did an about turn and called for immediate stimulus; Kristin Forbes had said she wanted to see hard data, so is seen as a possible dissenter
• Nomura’s Jordan Rochester says if the Bank cuts by 25bps and the vote is unanimous, the market may see a significant chance of another cut in November, while a 5-4 split would suggest a longer wait

THE MIX OF ANY FUTURE EASING?

• Whatever the MPC announces today, Carney’s press conference will be scoured for further clues on how the U.K.’s rate- setters see the relative usefulness of its policy options
• Particular attention will be paid to any discussion on the new lower bound for rates or whether the Bank has strongly held views on how negative rates would impact the country’s banks
• Any signal that new rate is the new floor could see 10Y gilt yields rise to 0.90%, TD Secs analysts say

ANY UPDATE ON BREXIT VIEWS?

• Ahead of the referendum, Carney said Brexit could possibly lead to a technical recession, drawing criticism from politicians for scare-mongering
• At the July meeting, he said there were preliminary signs the result has affected sentiment in households and firms and there

are signs some businesses are beginning to delay investment

• Today’s GDP forecasts are widely expected to show a slower pace of growth; the extent of any forecast cuts will be used to judge how much more easing the Bank may eventually do

WHAT DOES THE BANK SAY ABOUT STERLING AND INFLATION?

• GBP is now down 9% since the June 23 vote on a TWI basis
• Ahead of the referendum, the bank said roughly half of GBP’s fall since Nov. 2015 might reflect the referendum effect; in July, Carney said the fall could help the U.K’s economic adjustment
• While inflation will probably be revised higher, y/y CPI peaked above 5% in 2011 and the Bank left policy unchanged; any update on current thinking is expected to suggest that would be the case again