Bank of England: We cannot rule out another rate cut - Nomura

Research analysts at Nomura, explained that they cannot rule out another rate cut from the Bank of England but they warned that the pressure on the Monetary Policy Committee (MPC) to delivery further easing on Thursday eased. 

Key Quotes: 

“The MPC published its last forecast while facing a vacuum of data covering the post-referendum period. And the signs that existed then were very concerning. Since then, there has been a bigger rebound in the surveys than expected and the economy appears to have carried more momentum throughout the past several months. So there has been a positive short-term demand shock. Inflation is also supported by sterling weakness, a rise in energy prices and looser credit conditions.”

“All this reduces pressure on the MPC to deliver further easing at this meeting. However, such news largely concerns the short term. Brexit-related uncertainty still exists and investment surveys continue to corroborate the MPC's expectation for a slowdown. It is that longer-term story that provides the disinflationary pressure to the policy-relevant horizon. As such, we cannot rule out another Bank rate cut to the new lower bound a little above zero. Indeed, the MPC indicated and Mr Saunders' simulations showed that a cut would be necessary at this meeting unless the medium-term outlook improved relative to that in August. And the lesson taught to the market three months ago was that the MPC will tolerate an inflation overshoot and put faith in its growth forecast.”

“Altogether, we see risks skewed towards a dovish surprise at this meeting, inaction or guidance thereof.”