TD Securities analysis team note that the Bank of England's MPC voted unanimously to leave policy on hold today, and left most of their messaging unchanged from the May meeting.

Key Quotes

“We note the following marginal developments:

  • The MPC noted the divergence between its smooth Brexit assumption and the market's implied view, and ascribed the move in the yield curve to a perceived increase in the market's odds of a hard Brexit.
  • GDP growth in 19Q2 was downgraded to 0.0% q/q, leaving first-half growth slightly below that of potential. Our own current tracking suggests -0.2% q/q growth, and we could see the BoE revise their estimate down in the August forecast round.
  • The MPC noted that trade tensions had intensified since May (at that time, they had noted that tensions had been elevated but largely unchanged in previous months). We view this as a relatively obvious marking to market, rather than a sharp change in view by MPC members.
  • Offsetting this, the MPC noted that global financial conditions have eased since May. This in itself is a boost to the economic outlook. The MPC has recently viewed easier financial conditions as an exogenous, non-UK shock, meaning that the impact spills over positively to the UK.”

“Between now and August, there are a number of key milestones to pass, including the G20 meetings, (possible) clarity from a new UK Prime Minister on their path of Brexit and/or a general election, and a string of global Q2 survey and activity data. The committee will take full stock of the outlook in August with these in hand.”

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