Bank of England meet today - preview

Author: Eamonn Sheridan | Category: Central Banks

The BoE Monetary Policy Committee meet today, announcement due at 1200GMT

A couple of previews, in brief:

We expect the BoE to be on hold, with the rhetoric of "gradual and limited" rate hikes in the event of an orderly Brexit likely to be maintained. However, the minutes will likely focus on the effect of persistent Brexit uncertainty on activity data.

On the economic front: 
  • Data since the MPC's February meeting shows that the economy contracted sharply in December but fully rebounded in January.
  • Momentum into 2019Q1 remains at about the same weak pace as 2018Q4, however, and there remains a high degree of uncertainty around growth dynamics (eg, from Brexit stockpiling). 
  • The MPC is likely to leave their Q1 nowcast of 0.2% q/q intact.
Inflation has come in roughly in line with the BoE's February forecast, and the labour market continues to remain tight, especially as wage growth is still trending up.
  • We note that there are some preliminary signs of softening in the labour market (see chart), which might get a mention in the minutes Given market pricing has not moved much since their February meeting, we expect no change in the policy relevant wording of the MPC's statement, with rates expected to rise at a "gradual pace" and to a "limited extent". 
  • We do not think the March MPC meeting will provide sterling with a major directional cue. With the ongoing drama over Brexit building to a peak, traditional FX market drivers are likely to remain a distant concern for global investors, at least for now. Our expectation that policymakers will walk a very careful line in the current political environment only reinforces the view that the BoE will stay behind its ramparts for now.

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