skip to main content
Close Icon We use cookies to improve your website experience.  To learn about our use of cookies and how you can manage your cookie settings, please see our Cookie Policy.  By continuing to use the website, you consent to our use of cookies.
Global Search Configuration

BoE POLICY OUTLOOK BoE Gov' Carney has revised his guidance (on Jun 28th) via a significant alteration to his Mansion House narrative - the turn on a sixpence. As we said at the time of his MH blind-sided guidance, it didn't cut ice with our view that the UK rates structure is too low/benign. Carney has a track record of trying too hard to fine-tune expectations, and unlike his US CB counterpart hasn't mastered the art (or had the experience) of warming markets up for big policy changes. He essentially ignored the far tighter than expected Jun '5-3' vote, and then comments in successive days via Forbes and most notably from the chief economist, Haldane. The latter a previous dove now turned. However, the forum in Sintra, has seemingly made amends and now the market has the bit between its teeth and via pricing models there is risk of 2017 tightening whereas most didn't see the risk until 2019 (post Brexit). Voting dynamics now are very interesting for the Aug 'super-meeting', McCafferty and Saunders are likely to cast a similar vote in Aug, but now Haldane could make up for now left Forbes (dramatically hawkish in her final speech) - who is actually replaced by the relatively unknown newcomer Tenreyro. The newby heralds from the LSE and she has held dovish views before and was anti-Brexit. Irrespective of a 5-4, steady vote, risk/reward favours far more curve steepening as the odds of moves in Aug and Nov have soared. While Aug is just 23%, Nov has crept over 50%. Implied probabilities should increase further as meetings draw nearer especially if data is aligned. We maintain our (Jun 23rd) shout for the 10-year to hit 1.30% and can't see much to stand in the way of 1.50% - looks feasible before the Nov meeting.

What to look for in August's guidance:

In Jun minutes. policy makers stated that Q1 GDP is expected to be revised up to 0.3% (looked suspect at the time) with further improvement in Q2, to 0.4% q/q. Cited; export surveys/investment intentions running above average, acknowledgment of 'surprise' low wages given historic norms and inflation to come, over 3% (already 2.9%) and a view that continued employment growth could suggest spare capacity and inflation tolerance is being eroded faster - Carney also admitted this and we also remember his line that Brexit didn't tie the MPC's hands. BANK RATE 0.25%, LAST MOVE -25 BP AUG 2016, NEXT MEET AUG 3 2017

Recommended Articles

  • IGM FX and Rates

    China Insight: From Peking Founder to MPA loosening

    20 Feb 2020

    China Insight: From Peking Founder to MPA loosening

  • IGM Credit, IGM FX and Rates

    The Context 02.18.20

    18 Feb 2020

    Inside this week’s edition of The Context, Financial Intelligence thought leaders discuss: The JPY Week - Bias is Bearish Has the impact of coronavirus now peaked? We say such talk is premature and an underlying bid Usd/Jpy will continue to slow into 110.00-plus. Euro FIG Snapshot: Virus Protection Fully Operational With the recovery in risk assets extending into a second week, more issuers emerging from blackout and the credit market's virus protection evidently up to date, the pace picked up in the non-covered primary FIG market last week. Equities Ignore, Hope … Euro Indicates Slowing EMU Economy It doesn’t take much to light a fire under equities, but it is going to take much more to push bond yields higher... Read more from The Context and subscribe to have it delivered to your inbox each week!

    Topics Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: Credit Bonds Will Play Catch up on More Supportive Measures

    By Tim Cheung 18 Feb 2020

    The authorities, MOF, PBOC and CBIRC, hosted a joint conference on Feb 7 to provide an update on supportive policies in light of the coronavirus situation. We believe the conference delivered a loosening bias tone as a nimble response to the virus outbreak. Next move following the huge liquidity injection and provision of first batch of special relending funds to more than a dozen of banks is going to be an LPR cut on 20 Feb. We expect a 10bp cut in both 1-year and 5-year LPRs on 20 Feb (chart 1), similar to the magnitude of the latest OMO rate cut. A more sizable cut may mean the policymakers are opting for more aggressive monetary easing to cushion the economic shocks arising from the coronavirus outbreak.      

    Topics Industry News

;

Any questions? Speak to a specialist

Would you like to request sample data or analysis from Informa Financial Intelligence? 

See how our tailored solutions can help you gain a competitive advantage: