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BoE decides on interest rates
Monetary Policy Committee (MPC) to convene
The majority of economists polled by Reuters on September 10th 2018 suggested that the Monetary Policy Committee (MPC) will decide to keep the BoE’s benchmark interest rate unchanged at 0.75%. The MPC voted unanimously to raise borrowing costs by 0.25% on its August 2nd 2018 meeting because as its statement issued right after the end of the meeting said “recent data appeared to confirm that the dip in output in the first quarter of 2018 was temporary and that the labour market has continued to tighten and wage growth has firmed.” The MPC noted that an ongoing tightening of monetary policy over the forecast period will be appropriate to return the Consumer Price Index (CPI) inflation sustainably to the 2% target.
A report by Nomura, which is one of the largest financial services group with headquarters in Asia, said that the BoE is not expected to change policy or reveal something new following its decision to raise interest rates in August 2018. Nomura’s analysts suggest that even though the economic data have softened a little relative to the market’s expectations, they doubt that it will have a material influence in the BoE’s September 2018 policy statement. They also add that they expect the decisions to keep rates and QE on hold to be unanimous.
Danske Bank’s economists seem to agree with their Nomura counterparts. In a report distributed to Danske Bank’s clients, it is said that “regarding the BoE, we expect a rather uneventful meeting and hence the British Pound will stay focused on Brexit negotiations, which bodes for volatility ahead of the key Tory Party conference in late September. Communication from both the EU and the UK has been remarkably positive and solution-seeking lately, which has helped reduce the Brexit risk premium somewhat.”
Analysts at Barclays suggest that the BoE’s governing board will reiterate its “gradual and limited” rhetoric in its post-meeting statement. “The BoE will meet next week for its September meeting, six weeks after hiking its bank rate to 0.75% in August 2018. Given little movement in data published since, we expect the MPC to maintain all monetary policy parameters unchanged (bank rates, asset purchase targets) by unanimous votes as it reiterates its gradual and limited rhetoric. While we see little scope for market-moving revelations, there will nonetheless be some focus on whether Governor Carney's mandate extension until 2020 is confirmed and how the Bank will deal with yearend Brexit uncertainty. Indeed, it looks increasingly likely that the Bank will have to update its forecast (next Inflation Report to be published on November 1st 2018) without confirmation of a Withdrawal Agreement.”
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