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.
“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.”