BoE: Interest rates and asset purchases to remain unchanged – Deutsche Bank

The analysis team at Deutsche Bank points out that whether or not markets are a bit more exciting today might depend on if the BoE surprises in any sense when they deliver their MPC meeting outcome along with the minutes and an updated inflation report.

Key Quotes

“Our economists caution against assuming that the weaker than expected Q1 GDP report and recent sterling appreciation (equating to less imported inflation) will substantially alter the sense of declining tolerance for higher inflation. They note that on the one hand the first estimate of UK GDP is notoriously inaccurate and the latest PMI data is more consistent with the MPC’s recently more constructive stance on growth. On the other hand, sterling appreciation would mean lower inflation all else unchanged. However, other things have changed and our team expect the MPC forecasts for inflation to rise further above target in 2017 and 2018.”

“In summary, their expectation for what we get today is as follows: (1) Interest rates and asset purchases to remain unchanged. (2) The “balanced risks” assessment to remain unchanged. (3) Kirsten Forbes to maintain her vote for a 25bp policy rate hike. They see significant risk that Michael Saunders will start voting for a hike also in the next few months; it cannot be ruled out that he votes for it in May. (4) They expect the sentence that “some members” could consider a more rapid tightening of policy to remain. (5) The concessions towards a more positive economic performance to remain in the minutes despite the weaker Q1 GDP number. (6) A repeat of the statement in the minutes that “some modest withdrawal of monetary stimulus over the course of the forecast period remains appropriate”.”

“That meeting is due at 12pm BST, followed by Governor Carney speaking shortly after.”