BoE: If not now, when? – Nordea Markets

Bank of England (BoE) left its monetary policy unchanged today, well in line with expectations and the MPC was split in its decision with McCafferty and Saunders again advocated to increase the bank rate by 25 bps, notes Andreas Wallström, Research Analyst at Nordea Markets.

Key Quotes

“In its new Inflation Report, the GDP growth forecast was revised down near-term, driven by lowered expectations on domestic demand, but unchanged for 2019 and 2020. The unemployment forecast was revised down somewhat further and is now expected to level out at 4.0% in 2019.”

“The inflation forecast was revised lower, especially in the near-term, but marginally also in 2019 and 2020. The bank now sees inflation to stabilize at the target as from 2020. The reason is that the bank anticipates that the effect from the past sterling weakness is fading faster than previously thought.”

“We expect that the current softness in economic data will be more lasting than the Bank of England expects. In turn, this will hold back inflationary pressures. The Brexit worries may rise, not fade, over the next few months. In all, we therefore forecast that the Bank of England leaves its policy rate unchanged throughout 2018 and 2019.”