A preview of the BoE Monetary Policy Committee meeting next week (Thursday February 7)

Poor dears, they are hamstrung by the Brexit mess. Nevertheless they do their their best.

Did everyone see the live footage of the last meeting?

via GIPHY

Anyway … a summary of the Morgan Stanley expectations:

TL;DR version:

  • We see the MPC as having a hawkish bias, given a positive output gap and rising cost pressures. But it is waiting for Brexit, where we now expect delay, pushing the next hike out.

More:

MPC as having a hawkish bias...

  • Unemployment (4%) is well below the MPC's estimate of full employment (4.25%), implying that the UK now has a positive output gap.
  • Pay growth (3.3% 3M/Y) has picked up to a cycle high, while inflation remains above target. An economy running at full employment and rising domestic cost pressures give the MPC a hawkish bias, we think, especially with policy rates (0.75%) well below the MPC's estimate of neutral (2-3%).

...but preferring to wait for clarity on Brexit:

  • There remains a wide range of possible Brexit outcomes, which could have a major impact on economic prospects and the appropriate monetary policy response.
  • We see the next hike as being dependent upon clarity on a way forward

Likely Brexit delay

  • For the moment, we assume a one-quarter extension to the Article 50 negotiating period
  • This in turn knocks back our forecast for the next hike from May to 2H19

9-0 on hold

  • the MPC will likely feel reduced pressure for action, since 4Q growth was disappointing and below trend, and weak energy prices should drive inflation below target in 1Q19, though rising pay and fiscal loosening point to growing medium-term cost pressures.