Citi on today's BoE decision

We expect a vote of 7-2 with McCafferty and Saunders continuing to vote for a hike. The most likely member to join the hawks would be Haldane given his previous speech back in June where he stated - “I do think that beginning the process of withdrawing some of the incremental stimulus provided last August would be prudent moving into the second half of the year.”

We currently have 1.25bp priced for this meeting. This has been as low as just 0.25bp and as high as 2bps. The recent data since the last meeting has largely been in line with expectations although GDP is continuing at a sluggish pace at just 0.5% for H1, with indications of picking up only slightly into H2, yet core CPI is at highs of 2.7%.  

We believe the BoE will on balance continue to place greater weight on the environment of low growth, low wage growth and anchored inflation expectations to keep rates unchanged throughout this year. High inflation will continue to be justified by temporary currency factors that will wane towards the middle of next year.

14 Sep 2017 - 08:05- Economic Commentary- Source: Citi

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