BoE review: Joining the dove herd – Nordea Markets
|According to Morten Lund, analyst at Nordea Markets, the Bank of England (BoE) stroke a more dovish tone at the June meeting, as growth has softened, and the perceived risk of a no-deal has increased.
Key Quotes
“In line with both our view and consensus, the Bank of England (BoE) kept both the Bank Rate and the bond purchase programme unchanged. Although there was some speculation before the meeting whether MPC members Michael Saunders (most likely) or Andy Haldane could dissent due to recent high pay growth numbers, the decision was unanimous (9-0) to keep the policy rate on hold at 0.75%.”
“The overall message was, in our opinion, clearly to the dovish side.”
“Adding to the dovish message, the MPC noted that the global risk sentiment had weakened and the perceived risk of a no-deal had increased, as reflected by the weak sterling.”
“We, however, find it difficult to argue for any rate hikes anytime soon as growth is set to slow in Q2, inflation has downside risks (see model below), G10 central banks have shifted in a dovish direction and the fear of a no-deal Brexit is very much alive and kicking.”
“At the other side of the coin, we also do not find a rate cut likely (our AI model does not as well, see below). Basically, we think the BoE’s hands are tied due to Brexit and with inflation currently at target, a cut does not seem warranted in the coming months. We would only expect a cut in the case of a no-deal event.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.