BoE: Rates Should Hold on Not So Super Thursday – Investec
Research Team at Investec, suggests that Super Thursday, this week’s key
event is finally on its way and we will be treated to the Inflation
Report, the Monetary Policy Committee’s (MPC) rate decision and the Bank
of England meeting minutes at 12 noon, before Mark Carney steps up for
the usual press conference at 12:30.
Key Quotes
“We expect no change in policy with Bank rate to be held at 0.50% and
the stock of asset purchases under the QE programme held at £375bn.
However there are two things to watch out for. First, any comments on
the EU referendum could be market moving. One possibility is that the
Governor will allude to his view of adverse economic implications of a
Brexit – that might make the MPC look dovish. But will this instead help
sterling rally if such comments are seen to help the ‘remain’ campaign?
Second, further falls in sterling and rises in the oil price since the
last Inflation Report in February may see the MPC nudge up their
inflation forecast. All else equal, that would be seen as a hawkish
signal.
UK data yesterday was fairly mixed with UK Industrial production growing
at 0.3% mom against a consensus of 0.5% and the manufacturing sector
expanding by 0.1% mom against a consensus of 0.3%. However we did see an
upward revisions to the January and February data. Despite this a
slightly softer than expected March growth rate might point to less
momentum going into Q2 than previously expected. And, looking at the
broader trend, the manufacturing data in particular remain lacklustre.
Following the release Sterling fell marginally, with GBPUSD falling just
below 1.44 and trading in the low 1.44s for most of the session. In the
early hours of the morning we had the UK RICS House Price Balance,
which showed weakness of the forward looking activity indicators. For
example, the new buyer enquiry balance fell to -22.3%, its lowest level
since August 2008, while agreed sales declined to a 17-month low of
-7.1%. The most likely reason for the overall softness of the survey is
April’s introduction of the higher rates of stamp duty for second
purchases but RICS also cited uncertainty over June’s referendum on the
EU.”
