BoE: Trapped in a holding pattern - Rabobank

Rabobank analysts suggest that the Bank of England’s MPC will hold one of its quarterly Super Thursdays, but against the backdrop of intense political uncertainty regarding the UK’s withdrawal from the European Union, the Bank of England is trapped in a holding pattern.

Key Quotes

“We therefore expect the MPC to keep its policy on hold at today’s meeting, even as they will likely stick to their guidance of a slow rise in interest rates.”

“In fact, the MPC’s confidence in this guidance may even be bolstered a bit by some better-than-expected activity data, while the recent rise in oil prices is likely to have pushed their CPI forecast somewhat higher for the second half of 2019. For this reason, there is a slim possibility that Michael Saunders –the most hawkish of the pack– will vote for a rate rise to 1.00%.”

“The MPC member has indicated earlier in the year that he would like to see more clarity about Brexit before voting for a raise in rates, but the 6-month extension to Article 50 might be a little too much to ask. In that case, the single dissent could also be interpreted as a signal that the MPC doesn’t permit Brexit to handicap its policy making. But even as the immediate risk of a no-deal Brexit has receded, we remain unconvinced.”

“It is much more likely that the Bank of England will join the Fed and the ECB in keeping its policy on hold this year.”