TD Securities analysts are expecting the Bank of England’s MPC to leave policy unchanged at their upcoming meeting as Brexit uncertainty continues to dominate the landscape.
Key Quotes
“There is scope for the MPC to upgrade their growth outlook slightly and a chance one member (likely Michael Saunders) votes for a hike, so markets could take a hawkish signal from this meeting.”
“We expect 2019 growth to be upgraded slightly. Despite a likely upgrade to the MPC’s 19Q1 nowcast, they will probably unwind much of that strength in 19Q2 and leave the GDP forecast broadly unchanged from 19H2 onward (we don’t think the MPC will go as far as a negative q/q GDP print in 19Q2, but it can’t be completely ruled out). Higher 19Q1 growth, even if mostly offset in 19Q2, could mathematically boost 2019 growth to 1.4% (Feb IR: 1.2%).”
“The inflation projection is likely to be left broadly untouched vs the February inflation report, especially in light of the recent price data coming in on top of the MPC’s projection.”
“The MPC could have a communication challenge on its hands at this meeting: an upgrade to the growth forecast (even if mostly mechanical) alongside a possible dissent to hike rates immediately will lend a hawkish tone to markets. The press conference is likely to push back slightly on this interpretation, with the Governor stressing global growth concerns as one mitigating factor.”
“Brexit will undoubtedly feature heavily in the press conference. Many members of the MPC have softened their No Deal easing rhetoric. The key message will be, as always, that Brexit uncertainty weighs on the forecast, and that the BoE can’t pre-commit to any response to the various outcomes. But the MPC will need to have a view on what the potential 6-month extension means for policy. Impatience could start to play a bigger role.”
“We don’t expect any change to the forward guidance language, with the MPC committing to raise the Bank Rate at “a gradual pace and to a limited extent”.”
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