BoE to remain on hold, waiting for more data – TDS

Next Thursday, the Bank of England will announce its decision on monetary policy. Analysts at TDS, expect the Monetary Policy Committee to leave policy on hold. They also expect the MPC to acknowledge that data released since their early-May decision confirms that the 18Q1 slow-down in growth was temporary.

Key Quotes:

“We expect the MPC to leave policy on hold next week, with a 7-2 majority (and risks of a 6-3 vote). The MPC is highly data dependent, and while recent data will confirm their view that the 18Q1 weakness was temporary, they’ll likely want to wait through one more data cycle before making a firm decision on an August hike.”

“It’s unlikely the two hawkish dissents last month will change their mind. This leaves a 7-2 vote as most likely. However, given confirmation that Q1 growth was temporary, it’s possible a third member joins them to vote for a hike, bringing the total to 6-3. We think the market would likely interpret as a hike being slightly more imminent.”

“Nevertheless, the acknowledgement that the 2018Q1 weak spot was temporary might come across as sounding somewhat positive. Language around the future path of rate hikes, however, is likely to remain unchanged, emphasising a gradual pace of hikes, and to a limited extent.”

“Our expectation for an unchanged outcome this month should leave GBP without a major directional push. While the ECB has taken on a dovish tone, we think the threshold is high for investors to embrace downside potential in EURGBP near-term. We think evidence favoring an August hike will need to be overwhelming before the cross can break below recent ranges.”