BoE December Minutes Summary: BoE votes 9-0 to keep rates unchanged at 0.5% as expected


Key judgements:

Vote split on the base rate: 9-0 in favour of keeping rates unchanged

Vote split on corporate bonds: 9-0 in favour of maintaining the current stock of corporate bonds

Vote split on APF: 9-0 in favour of maintaining the current stock of UK government bond purchases

Inflation: Inflation (3.1% CPI Y/Y in Nov) is likely close to its peak (Prev. was expected to peak at 3.2% in October) and will decline towards its 2% target in the medium term. The deviation in expectations from the Nov QIR and the actual Nov print have not materially impacted the bank’s outlook

Brexit: The MPC notes the progress in negotiations between the UK and EU and states that they have reduced the likelihood for a disorderly exit with these developments to be given more detailed consideration in the February QIR. However, reiterates, Brexit remains the greatest source of uncertainty for the economic outlook

Rates: The MPC remains of the view that were the economy to follow the path expected in the QIR, ‘further modest increases in the Bank rate would be warranted over the next few years, in order to return inflationary sustainability to the target’. Any future increases in the Bank rate are expected to be at a gradual pace and to a limited extent (same as stated in the Nov Report).

Growth: Domestic indicators suggest that GDP growth in Q4 could be slightly softer than that of Q3, albeit a little above the central 0.2% forecast in the Nov QIR. Measures taken in the Autumn budget will lessen the drag on aggregate demand compared to previous plans

Wages: Earnings growth has been as broadly expected during 2017. The committee continues to expect that the annual rate of pay growth would pick up in the early part of next year, though there remains uncertainties around that projection.

Labour market: Remains tight and surveys suggest that this will likely continue

Slack: The steady erosion over the past year or so has reduced the degree to which it is appropriate for the MPC to accommodate an extended period of inflation above the target (same as stated in the Nov report)

14 Dec 2017 - 12:00- ForexImportant- Source: BoE

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