BoE: MPC seems inclined to look through firm real sector and price data - BBH

In view of the analysts at BBH, The Bank of England meets and issues its quarterly inflation report and just like the FOMC looked past the soft Q1 GDP, the MPC seems inclined to look through firm real sector and price data.  

Key Quotes

“Each of the three April PMIs released last week were better than expected.  Prices pressures do not appear to have peaked.  However, it is still arguably reasonable to expect the economy to slow and the base effect points to a peak in CPI, perhaps by the end of Q3.  Since the last quarterly inflation report, growth has been a bit slower than expected, and inflation a bit firmer.”

“Forbes disagrees.  She dissented last month for an immediate hike and is likely to dissent again.  However, her term ends shortly, and she probably was unable to convince any of her colleagues to join her.  That said, if perchance there is more than one dissent, it could catch the market leaning the wrong way.”

“Consider that the implied yield of the December short sterling futures contract finished last week at 42 bp.  In the middle of last December, before year-end pressures emerged, the yield was near 55 bp.  We note that in the future market, speculators have retained a large short gross sterling position (135k contracts, 62.5k GBP per contract), the largest among the currency futures.”