- MPC set to match consensus and keep bank rate at 5.25%
- Vote seen split 6-3 in favour of unchanged
- Bank expected to maintain hawkish stance
- Data points to year end stagnation say analysts
- Rate decision due at 12.00 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
13 December 2023 | 15:20 GMT
LONDON – The Bank of England will be the last of the major central banks to announce monetary policy this week but similar to its peers, will likely disparage talk of cuts.
The BoE’s Monetary Policy Committee is widely anticipated to keep its main lending rate at 5.25% on Thursday.
Barclays’ Silvia Ardagna along with the majority of polled analysts looked for no change to interest rates. “We think the vote will remain split, with governor Andrew Bailey and the deputy governors Sarah Breeden, Ben Broadbent, and Dave Ramsden, and chief economist Huw Pill forming a majority block for holding, while the external MPC members Megan Greene, Jonathan Haskel, and Catherine Mann will continue to vote for a 25bp hike. We have a lower conviction on the vote of external member Swati Dingra.”
Economic data heading into the meeting has been favourable with inflation trending lower and the labour market continuing to loosen. However, the deterioration in growth may make it harder for policymakers to argue against the need for cuts next year.
Data dependency
Earlier on Wednesday, the Office for National Statistics said GDP growth contracted by 0.3% in October after growing 0.2% in September. In the three months to October, the economy flatlined. Statisticians reported that increases in services, led by engineering, film production and education – which recovered from the impact of summer strikes – were offset by falls in both manufacturing and housebuilding.
“The November final PMIs paint a picture of lacklustre but likely positive growth in Q4 23, in line with our real GDP forecast of 0.1% q/q,” Ardagna posited.
Tuesday’s labour survey didn’t veer too far from the previous month’s reading. ONS director of economic statistics Darren Morgan said, “Our labour market figures continue to show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter.”
Nonetheless, wage growth appears to have peaked for now with signs that pressure might be easing overall.
“Assessing developments in the labour market remains difficult, as data on employment and unemployment are no longer being drawn from the Labour Force Survey,” Ardagna opined. “However, the REC/KPMG release this week painted a softer picture for the labour market and wage growth for next year.”
What the bank desks say
Monetary policy is widely perceived to be in restrictive territory at present, so market attention has turned to the timing of potential cuts in 2024.
UBS’s Anna Titereva noted that recent comments from the more hawkish MPC members Greene and Haskel suggested that they remain concerned about inflation persistence and hence were likely to vote in favour of another hike. “During the recent Treasury testimony, Catherine Mann acknowledged the current ‘soft patch’, but pointed to still-elevated corporate wage expectations, which we think indicates that she is likely in favour of another rate hike.”
Barclays also expected the committee to continue to indicate that the current monetary policy stance is restrictive, with growing signs of its effect on activity and the labour market. Noting that “Overall news on data released since the November MPC meeting has been mixed and has not provided firm evidence on the medium-term persistence and strength of the disinflationary process.”
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- MPC set to match consensus and keep bank rate at 5.25%
- Vote seen split 6-3 in favour of unchanged
- Bank expected to maintain hawkish stance
- Data points to year end stagnation say analysts
- Rate decision due at 12.00 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
13 December 2023 | 15:20 GMT
LONDON – The Bank of England will be the last of the major central banks to announce monetary policy this week but similar to its peers, will likely disparage talk of cuts.
The BoE’s Monetary Policy Committee is widely anticipated to keep its main lending rate at 5.25% on Thursday.
Barclays’ Silvia Ardagna along with the majority of polled analysts looked for no change to interest rates. “We think the vote will remain split, with governor Andrew Bailey and the deputy governors Sarah Breeden, Ben Broadbent, and Dave Ramsden, and chief economist Huw Pill forming a majority block for holding, while the external MPC members Megan Greene, Jonathan Haskel, and Catherine Mann will continue to vote for a 25bp hike. We have a lower conviction on the vote of external member Swati Dingra.”
Economic data heading into the meeting has been favourable with inflation trending lower and the labour market continuing to loosen. However, the deterioration in growth may make it harder for policymakers to argue against the need for cuts next year.
Earlier on Wednesday, the Office for National Statistics said GDP growth contracted by 0.3% in October after growing 0.2% in September. In the three months to October, the economy flatlined. Statisticians reported that increases in services, led by engineering, film production and education – which recovered from the impact of summer strikes – were offset by falls in both manufacturing and housebuilding.
“The November final PMIs paint a picture of lacklustre but likely positive growth in Q4 23, in line with our real GDP forecast of 0.1% q/q,” Ardagna posited.
Tuesday’s labour survey didn’t veer too far from the previous month’s reading. ONS director of economic statistics Darren Morgan said, “Our labour market figures continue to show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter.”
Nonetheless, wage growth appears to have peaked for now with signs that pressure might be easing overall.
“Assessing developments in the labour market remains difficult, as data on employment and unemployment are no longer being drawn from the Labour Force Survey,” Ardagna opined. “However, the REC/KPMG release this week painted a softer picture for the labour market and wage growth for next year.”
Monetary policy is widely perceived to be in restrictive territory at present, so market attention has turned to the timing of potential cuts in 2024.
UBS’s Anna Titereva noted that recent comments from the more hawkish MPC members Greene and Haskel suggested that they remain concerned about inflation persistence and hence were likely to vote in favour of another hike. “During the recent Treasury testimony, Catherine Mann acknowledged the current ‘soft patch’, but pointed to still-elevated corporate wage expectations, which we think indicates that she is likely in favour of another rate hike.”
Barclays also expected the committee to continue to indicate that the current monetary policy stance is restrictive, with growing signs of its effect on activity and the labour market. Noting that “Overall news on data released since the November MPC meeting has been mixed and has not provided firm evidence on the medium-term persistence and strength of the disinflationary process.”