BoE expected to remain on hold for the time being – UOB

Lee Sue Ann, Economist at UOB Group, gave her views on the latest releases in the UK docket and the BoE event.

Key Quotes

“The latest slew of economic data out of the UK is likely to intensify pressure on the BoE. Last week, the BoE’s monetary policy committee (MPC) was divided over whether to reduce rates, with two of the nine-member committee voting for a 25bps rate cut from the current 0.75% rate”.

“This was the first time that there were votes for a lower policy rate since 2016, and the first MPC decision that was not unanimous since June 2018. The dissent by Michael Saunders was particularly significant, because it was only about 18 months ago that he had been the outlying vote for a rate hike. That said, his recent comments had marked him as an emerging dove, whereas Jonathan Haskel’s vote for a rate cut came as a total surprise”.

“Despite the dovish tilt at the 7 November meeting, we expect the BoE to be in a wait-and-see stance. We believe that the two dissenters against a large majority is still somewhat premature in tipping the balance for a rate cut, especially with a no-deal Brexit scenario off the immediate agenda. We would prefer to wait for the outcome of the impending election and its subsequent impact on how Brexit may proceed, before making changes to our forecasts”.