UK CENTRAL BANK TRYING TO APPEAR UNBIASED TO AVOID INFLUENCING OUTCOME

UK CENTRAL BANK TRYING TO APPEAR UNBIASED TO AVOID INFLUENCING OUTCOME

12 May 2016, 04:17
Mohammad Soubra
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UK CENTRAL BANK TRYING TO APPEAR UNBIASED TO AVOID INFLUENCING OUTCOME

 

The Bank of England (BoE) has to appear unbiased on the very political topic of Britain exiting the European Union. The Leave campaign has on multiple occasions accused the central bank on taking a stance by calling the potential Brexit the “biggest domestic risk to financial stability”. Tomorrow’s Super Thursday, so named because of the number of documents to be published at the same time, will be focused on that risk and how does the BoE plan to deal with the outcome whatever it maybe.

The inflation report will be key as the currency has depreciated since the last forecast, while the price of energy has recovered thanks to oil producer willingness to freeze their output levels. The U.K. economy has slowed down to a near stall after the release of the service sector PMI showed a three-year low in April. The market has already ruled out rate hikes from the BoE for at least 2 years given the state of the economy and the uncertainty on the outcome of the referendum. What the market will be looking at will be signs of a possible rate cut given the weaker economic results and rising uncertainties.

The BOE will issue its inflation report, monetary policy summary, the official bank rate and the minutes of the MPC on Thursday, May 12 at 7:00 am EDT. The British benchmark interest rate is not expected to change, while the focus will be on the inflation report’s language about the impact of Brexit and Governor Carney’s words on the same subject during his press conference.



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