It is the Bank of England (BOE) Rate Meeting today, but with no chance of a policy change (BofAML) suggest concentrating on the minutia of the minutes.
The BOE rate meeting today is not expected to result in any major policy changes.
However, given Wednesday’s sobering budget, which highlighted the U.K economy’s slow-down in growth and sclerotic productivity, risks may be that the gloomy fiscal picture is overlaid by an equally pessimistic monetary policy wash, further dimming the outlook for growth and hitting sterling, which is already under pressure from Brexit fears.
Analysts at Bank of America will be paying close attention to the minutes of the BOE meeting, published immediately after the announcement. They highlight the possibility of a discussion on a rate cut providing insight into the BOE’s thinking on interest rates.
According to the BofAML note:
“The BoE is side-lined by events out of its control for now: global and Brexit uncertainty. The only question for this week's meeting, which will see them keep policy on hold in our view, is how extensive the discussion of rates cuts was. We expect it to have been raised but to receive little support apart from Gertjan Vliege.A rate cut could do more harm than good (look abroad) and is not necessary, in our view.
Previously the BOE had been preparing to raise interest rates in line with the Federal Reserve, however, the potential for a crisis to follow the EU referendum in June, as well as global and domestic growth concerns, have temporarily side-lined the possibility of rate hike.
Given the more dovish trajectory of many other central banks the risk now is that the BOE will conduct a U-turn on rates moving from ‘hike-prep’ to contemplation of a cut.
Add to that the backdrop of Brexit and sterling could have the perfect storm brewing..
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