Summary:
- BoE keeps votes unanimously to keep rates unchanged
- GDP revised higher but CPI for 2020 sees sizable cut
- Muted market reaction but GBPUSD drifting towards 1.3025 support
There’s been some small scale selling seen in the pound in recent trade after the Bank of England announced the outcome of their latest policy decision. Some speculation that MPC member Saunders would dissent proved misplaced as the rate-setting committee voted unanimously to keep the official rate unchanged at 0.75. The accompanying statement provided little real new information as to the future path of monetary policy with increases in the growth forecasts tempered by a sizable cut to next year’s inflation forecast in what overall amounts to a fairly balanced update. Key lines from the statement and inflation report were as follows:
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Q1 GDP likely boosted by stockpiling
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More than 1 hike needed to keep inflation in check
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GBP strength, energy base effects to push CPI below target around 1-year horizon
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2019 GDP: 1.5% vs 1.2% prior
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2020 GDP: 1.6% vs 1.5% prior
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2021 GDP: 2.1% vs 1.9% prior
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2020 CPI: 1.7% vs 2.4% prior
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2021 CPI 2.1% vs 2.1% prior
With the announcement of a further and longer extension to Brexit deadline since the bank last met, there was some suggestion that this would allow for a more hawkish approach but this hasn’t really transpired. The chances of a rate hike anytime soon remain remote at best and it seems that Governor Carney and his fellow MPC members continue to operate in wait-and-see mode. The press conference was a bit of a non-event if truth be told with little by the way of market moving comments. Selected remarks are as follows:
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Wage growth picked up a little more than expected
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Employment also stronger
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Business not unreasonable to be cautious about Brexit
The pound has edged lower since the release, but the move has been fairly subdued thus far. 1.3025 possible support. Source: xStation
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