RBC on the BoE

The Bank will continue to be data-dependent. Nevertheless, in contrast to August, the reference to ‘the coming months’ clearly implies an MPC now thinking more actively about a rate hike. As this is the last meeting before the MPC’s projections are updated for the November Inflation Report, we think that if the Committee wanted to firmly signal a hike for that meeting, it would have chosen a different form of words than ‘over the coming months’. In our view, the minutes don’t communicate whether or not November 2017 or February 2018 is more likely, just that a move at either of those meetings is more likely than it was back in August. A more hawkish intent, but a long way from a pre-commitment to a November hike.

The MPC’s decision is not just about monitoring the incoming data, but also Brexit developments. Given the perceived lack of progress on the UK’s exit bill and the knock-on consequences for trade deal talks, changing expectations in the coming weeks are a possibility.

After repeated warnings that the market was under-pricing the risk of tighter policy at the previous MPC meetings, the BoE upped its rhetoric this time with a more forceful guidance. However, the language in today’s minutes in sufficiently caveated and still suggests that everything is conditional on data, and Brexit to a certain extent.

14 Sep 2017 - 15:23- Economic Commentary- Source: RBC

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