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/UK INSIGHT The BoE/MPC left Bank rate steady at 0.25% at the conclusion of the Aug 'super meeting' by an expected 6-2 vote. There was about a 20% chance for 5-3 and some even calculated a 1 in 10 chance for a hike today via SONIA pricing after a firmer than expected CIPS services PMI print. However, for bears/hawks it wasn't to be this time round and following the QIR/Gov Carney presser it seems as if November will be highly unlikely as well. September will be a complete dead-rubber. The reaction said it all with the Pound off almost 1% as Gilt yields succumbed 5 bp (10 year settled well below 1.20% with 1.15% seen). The minutes weren't totally as dovish as some MPC members reckoned the Bank may need tighter policy vs the market's curve implication. However, this was ignored as downgraded forecasts and pre-Brexit caution was ramped up in the narrative. As well as lowered growth, weaker wage inflation was seen and capacity only eroded in 3 years time. QIR 2017 GDP was trimmed to 1.7% from 1.9%, and 2018 by a similar amount as well. The QIR also lowered its future wages forecast to 3% vs 3.5% in May. BoE's dissenters were Saunders and McCafferty (no change as before) and there was little in Carney's tone to suggest any U-turn or flip-flopping from the Gov as he asserted no timing about rate rises had been given, Instead, based on current market assumed rate paths for rates, the first hike will arrive in Q32018, and the 2nd move by H12020, though as noted the MPC didn't want to pin itself to the market's assumptions. On inflation, CPI Inflation in 1 year is seen at 2.58% (vs 2.64% in May) and is seen peaking at 3% in Oct 2017. CPI Inflation further out (in 2/3 years) is estimated to reach 2.19% and 2.22% resp (vs 2.20/2.26% seen in May resp). Overall, the QIR was broadly similar to May's version, but it seemed to have caught bears looking for a clearer heads up for tightening this year which seems a more remote chance unless there is super strong clarity of a smooth Brexit and data concurs. This look unlikely at this juncture, hence November hike chances (via WIRP) slumped to below 35% (vs ca 43% yest).

[BoE POLICY OUTLOOK . BANK RATE 0.25%, LAST MOVE -25 BP AUG 2016, NEXT MEET SEP 14 2017]

Recommended Articles

  • 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

  • IGM FX and Rates

    China Insight: Credit bonds will play a catch up on more supporting measures

    14 Feb 2020

    China Insight: Credit bonds will play a catch up on more supporting measures

;

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: