Trading the BoE Inflation Report - TDS
Research Team at TDS, suggests that a 9-0 vote seems the safe thing to
do for BoE in its forthcoming meet with the EU Referendum just 43 days
away.
Key Quotes
“But two MPC members
have said a deterioration in the data might push them to vote for a cut.
This is highly unlikely (they’d likely reverse by late-summer), but not
impossible: just last month the MPC said they’d look through any
near-term weakness in the data.
Inflation Forecast:
The inflation forecast will need to incorporate the move up in oil
prices from the Feb IR’s $37/bbl 2016 assumption, which will boost this
year’s inflation forecast. Rate expectations have fallen since Feb, so
if the MPC incorporate yields below 0.50%, this should boost the Year 3
inflation forecast to a record high above 2.25%.
Growth Forecast:
With 16Q2 UK growth looking stagnant and global demand somewhat softer
than expected, expect a slight downgrade to 2016 growth (conditioned on a
Remain win). While spare capacity is nearly worked off, the sub-trend
16Q2 will again open up excess supply.”
