Today, we have an all-important BoE meeting and as we get close to the decision timings, here are the expectations as forecasted by the economists and researchers of 5 major banks for the upcoming meet.
Most of the researchers and economists expect the BoE to announce no change in its policy setting today but still think August is ‘live’. In addition, they suggest that the focus will be squarely on the minutes and in particular the tone and language used.
TDS
“The Bank of England sets policy today at noon BST and analysts at TDS expect the MPC to keep policy on hold with a 7-2 vote, reiterating that rates need to rise “gradually” and “to a limited extent”.”
“By re-affirming their May forecast (and in doing so, confirming that the 18Q1 weakness was temporary), we think that the MPC will move one step closer to an August rate hike.”
“Risks are generally balanced, with risks to the upside of a 6-3 vote, and to the downside of continued uncertainty over (in particular) production and trade data.”
“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.”
Rabobank
“We expect the Bank of England to keep rates on hold at today’s meeting.”
“Inflation steadied in May, but the labour market offers a mixed picture. The good news is that the strong pace of hiring indicates that the weakness in the GDP data is not the start of something more structural; the bad news is that the momentum in wage growth faded.”
“Forward guidance is still a cornerstone of Carney’s policy, but the policy outlook has become data dependent. If the economic data holds up in the next month, we think the Bank sees enough reason to raise the Bank Rate to 0.75% in August.”
“The statement and the minutes of this meeting could then be used to lay the groundwork; just a touch of hawkishness should be enough to get the message across.”
Deutsche Bank
“Ahead of today’s BOE meeting, our economists note that the focus will be squarely on the minutes and in particular the tone and language used to assess last week’s mostly dismal data.”
“In particular, the drop in wage growth (mom) for the first time in over a year and the sharp fall in industrial production should be a topic of discussion. On the one hand, poor output data to kick off Q2 could raise some concerns for the MPC regarding the strength of UK economy.”
“On the other, stronger retail sales data may keep hawks optimistic of a bounce back in Q2. They go on to say that while it is still early days, the BoE could strike a less hawkish tone though the team expect them to largely look past this in anticipation of May data (the last data they will see before the August MPC meeting).”
“In summary our economists expect no change in policy today but still think August is ‘live’ for an opportunistic rate hike (currently priced at a little over 25% probability for a hike).”
Nomura
“Most watchers expect a 7-2 split in favour of no move according to Bloomberg consensus, unchanged from the last meeting. It shouldn’t really matter if one of the hawks leaves the ranks or someone else votes for a hike, but the market will likely still react to it.”
“Currently, just under a 50% likelihood of a 25bp August hike is priced in. Our view is that the MPC is heading towards an August hike and thus would prefer the pricing to be a little higher. However, we note that in the run up to the May meeting, Governor Carney was uncomfortable with the market pricing in an extremely high probability of a hike.”
Danske Bank
“The Bank of England is meeting but it’s a ‘small meeting and there will be no press conference or updated projections. Instead, keep an eye on the minutes, which will give info on the likelihood of an August hike.”
“We believe the chances of an August hike are shrinking as data has disappointed a bit and uncertainty gone up recently due to trade war tensions.”
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