BoE: Likely to Hold its Fire for Now – Rabobank
Elwin de Groot, Senior Eurozone Strategist at Rabobank, suggests that
the Bank of England is expected to keep policy settings unchanged at
today’s meeting, which will also see the release of the Bank’s latest
Inflation Report and the meeting’s minutes.
Key Quotes
“And, as if that weren’t enough, Governor Carney will step up to the
plate to hold his quarterly press conference (the reason why this day
has been dubbed “Super Thursday”). This, we think, should give the BoE
ample of opportunity to give the recent weak economic data (e.g. last
week’s weak set of purchasing managers’ indices and yesterday’s shocking
manufacturing output data) some more (blue?) colour and context.
What’s more, Carney has previously warned that a Brexit was the greatest
domestic risk facing the economy. Since this uncertainty now adds to
the headwinds to growth, he may also decide to express some of his
thoughts on these Brexit risks. In any case, there seems to be a strong
chance that the BoE may revise down its projections for economic
activity.
The likelihood of changes to the inflation outlook are less
straightforward. While slower growth implies weaker demand, this year’s
softer tone of sterling could boost cost-push inflation, i.e. not the
demand-pull inflation the Bank is aiming for. Moreover, over the past
month there have been mixed signals on the pace of wage growth and
without a recovery in earnings we expect the first BoE rate hike of the
cycle to be delayed at least until May 2017.”
