BOE to stand pat on its monetary policy – Nomura

Analysts at Nomura offer their thoughts on today’s Bank of England (BOE) interest rate decision and minutes release, noting that they believe the BOE will make no changes to its monetary policy settings.

Key Quotes:

“We doubt the Bank will need to go as far as it did in September when it felt forced to "hand-hold" the market through a November rate rise. But we do think the MPC will be keen at the very least to preserve, and possibly raise, market pricing for interest rate rises over the Bank's three-year forecast horizon.

In particular, we think the market is still not pricing in enough of a policy response to deal with the BoE's near-50bp forecast overshoot of inflation relative to target based on unchanged monetary policy.

We assign a 70% probability to the MPC delivering a similar monetary policy statement (MPS) to February, which should leave yields unchanged to perhaps a little higher.

We assign a 25% probability to it delivering a more hawkish statement - which has been the direction of travel for the past 12 months or so.

We assign just a 5% probability to it delivering a more dovish statement. N.B. We would not view the omission of "coming months" as a dovish signal.”