Welcome to our rolling coverage of today’s BoE Monetary Policy Meeting (12.00 GMT). Previews, live coverage and reaction below…
11.15(GMT) Some Bank Views Ahead Of The Meeting
BNP Paribas – “The Bank of England is meeting on Thursday amid ongoing turbulence in the markets. Our economists believe the Bank may express some concern about the impact of the fall in oil prices on inflation and wages although this is likely to be counterbalanced by lessened concern over GBP strength. Overall, policymakers are likely to refrain from sending significant new signals until the February Inflation Report. One risk to the GBP is if the vote split changes from 8-1 to 9-0 but with rates markets already priced for no tightening until well into 2017, the impact should be limited.”
10.45 (GMT) Expectations For This Meeting
This meeting is likely to be very similar to the last with the BOE highlighting the dampened inflation forecast stemming from continued Oil price declines. Regarding the domestic economic picture Unemployment data, retail sales and lending have improved whilst wage growth and GDP continue to disappoint. The recent depreciation of Sterling will be welcomed by the BOE who have expressed concern about its strength. The BOE’s assessment of the threat from further Chinese-driven market volatility will be a key focal point of this meeting given the Bank’s previous statement that there was “little evidence” of greater than expected spillover effects from the slowdown in emerging markets.
10.15 (GMT) The Global Picture
Since the Bank Of England last met to discuss its monetary policy there have been several key developments.
The Fed finally initiated lift-off in the US, raising interest rates by the expected 25bps. Over the course of 2015 many layers felt that the Fed moving on rates would be bullish for GBP with the UK seen as the next G10 economy to raise rates but given the unwinding of UK rate-hike expectations, lift-off riven USD strength has weighed upon Sterling.
Oil prices, which had corrected higher into the end of 2015 have begun the year with sharp losses as a supply glut and subdued demand outlook continue to weigh upon the market. These continued declines further dampen the global inflationary environment, pushing the Bank Of England’s inflation target further out of sight.
Another factor in the continued Oil price declines, and a separate issue facing the BOE, is the resurgence of concerns surrounding the slow-down in China.Just last week Manufacturing data weakness prompted a 7% loss in Chinese equities triggering “circuit-breakers” which halt trading. The developments saw widespread global equity losses as investor sentiment was impaired with over £85bln wiped off the FTSE100.
10.00 (GMT) What’s happened since the last meeting?
Extending losses since the December meeting, Sterling is over 600 pips lower against the US Dollar as Non-Commercial players have steadily increased short positions. A disappointing economic landscape alongside Brexit and global-growth concerns have weighed heavily on investor sentiment with rate-hike expectations pushed out into May 2017.
Data since the last meeting has been mixed.
On the positive side:
- Inflation rebounded to 0.1% from -0.1% previous and 1.2% from 1.1% on core
- Unemployment rate declined to 5.2% from 5.3
- Retail sales beat expectations improving to 3.9% from 3.2% previous
- Net Consumer Credit beat expectations, improving to 1.5bln from 1.2bln previous
- Net Lending improved to 3.9bln from 3.6bln
On the negative side:
- Average weekly earnings fell back to 2.4% from 3% previous
- Public Sector Net Borrowing was more than expected at 13.6bln
- 3Q GDP was below expectations at 2.1%
- Manufacturing and Services PMIs both disappointed
- Trade Balance data showed a wider deficit than expected
- Industrial & Manufacturing production data both printed below expectations
9.50 (GMT) Welcome to our day’s rolling coverage
Hello and welcome to our live coverage of today’s BoE Meeting, with Littlefish FX Analyst James Harte. Here are the key details for the day:
- Bank of England Rate Decision January
- Thursday January 14th, 12.00GMT
- Current rate 0.5%, expected unchanged