The Bank of England monetary policy meeting is today - preview

Author: Eamonn Sheridan | Category: Central Banks

I posted a preview of the BoE Monetary Policy Committee (MPC) meeting on 14 September 2017 here: Bank of England meet Thursday - preview

Since that was written we've had UK inflation data on Tuesday (spoiler ... OMG!!! Hike Rates!!!):
And then on Wednesday, UK employment data (spoiler - nah, fuggedaboudit ... don't hike rates)
Barclays preview (this following the inflation data but before the labour market data):

expectations of a turn towards a more hawkish tone in Thursday's MPC decision.
  • We are now at levels that would be consistent with an expectation for another MPC member (by market consensus, BOE Chief Economist Haldane) to join external members McCafferty and Saunders in voting for tightening.
  • This sentiment has been aided by the August inflation data, which surprised to the upside. The BoE's forecasts have inflation peaking at 2.75% in Q4 17, so Tuesday's print was an unwelcome surprise.
  • But recall that the MPC previously acknowledged that the risk of the pass-through from the exchange rate to inflation are higher and more prolonged that it has estimated. And bear in mind that the source of inflation remains rising import costs, so effectively this is acting as a "tax" on domestic consumption. 
  • Ahead of today's labour market data, it is worth noting that the PMI employment sub-indices are still at levels consistent with declining unemployment. A further decline in unemployment if accompanied by an upward surprise in wages would only further heighten expectations for Thursday's decision.
And, then this from Barclays following the employment data:
  • We expect real core wage growth to remain in negative territory for the rest of the year, weighing on consumption and likely deterring the BoE from any imminent rate hike despite upside surprise in August inflation.
Note that Barclays are consistent with their expectation of the BoE to be on hold at today's meeting - it's the 'tone' from the Bank they are watching.

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