02 Feb 2018
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BoE POLICY OUTLOOK The BoE has no reason to change steady policy well into the future as the run of decent late 2016 data has run out of gas via the most recent macroeconomic metrics (released during last few weeks of Feb). While the Feb QIR saw some on the limit of inflation tolerance via two hawkish-leaning members (McCafferty and soon to be replaced Forbes), Jan CPI fell short of market and BoE Gov expectations with a 1.8% y/y print vs 1.9% consensus (and the risk bias was for 2%). Average weekly earnings also trailed the market median in a surprising setback while retail sales started 2017 in the same vein as they finished 2016 - disappointment. Consumers up to their eyeballs in debt it seems, affirming the recent trend in record borrowing/spending on plastic, and now more frequent signs of slowing house price inflation. Also in the QIR, the CPI in 2 years is seen at 2.6% and peaking at 2.75%, a bit lower than most street forecasts. GDP growth was revised up, but it may not now reach the relatively heady heights expected. A recent wire poll remained steadfast that the BoE won't tighten policy until 2019 at the earliest. The BoE has a widely publicised symmetrical policy bias, hence, there are some holding out for QE/APF resumption if the economy stalls during prolonged, messy Brexit negotiations. While the Bank has no compulsion to tighten policy until it learns more on the post divorce landscape - Carney stressed that the journey had only just started. Against this backdrop, yields look contained in the recent post Brexit 1.10-1.50% range. AB
BANK RATE 0.25%, LAST MOVE -25 BP AUG 2016, NEXT MEET MAR 13/14
IGM FX and Rates, IGM Credit
By Marcus Dewsnap 20 Nov 2017
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