BoE: Expect a 6-2 vote in favour of unchanged Bank Rate – Danske Bank

Analysts at Danske Bank note that despite slower growth, the Bank of England (BoE) has turned more hawkish recently, as inflation has moved higher and the unemployment rate lower and still, they do not expect a BoE rate hike before sometime in 2019:

Key Quotes

“GDP growth has slowed and has been weaker than the BoE anticipated, high inflation is temporary due to the weak GBP caused by Brexit, wage growth remains weak and does not indicate high underlying inflationary pressure and political uncertainty is high. We still view the core of the Monetary Policy Committee (including governor Mark Carney) as being tilted to the dovish side.”

“At this meeting, we expect the BoE to vote 6-2 in favour of keeping the Bank Rate unchanged against 5-3 on the previous occasion. The reason is mainly because Kristin Forbes, a known hawk voting for a hike, has left the committee and we do not think the new member will vote against Carney at the first meeting. Andy Haldane was leaning towards a hike in his recent speech but we think the August meeting is still too early for him to jump camp.”

“We expect the BoE to revise down its projection for GDP growth, reflecting that it has been too optimistic so far in 2017 and that growth is set to remain around the current level in coming quarters. The inflation path is likely to be broadly unchanged while the projection for the unemployment rate is likely to show a stabilisation around the current level of 4.5%.”

“When the BoE launched its big easing package in August 2016, it promised to consider whether the socalled Term Funding Scheme (TFS) should continue beyond February 2018 or not at the upcoming August 2017 meeting. As the BoE has become more worried about consumer credit growth, we expect it to announce that the TFS will end in February 2018.”