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By David Robinson
     LONDON (MNI) - Bank of England Monetary Policy Committee (MPC) member
Silvana Tenreyro gave a speech and held a question and answer session on Monday
at the University of Surrey, Guildford. Here are five things we learnt:
     -Tenreyro defended a wait-and-see approach to hiking Bank Rate, but if the
data do continue to come in firmer following the soft first quarter she looks
very unlikely to oppose tightening.
     "I think that much of the downside Q1 GDP news is likely to be erratic, but
it does increase the possibility of some underlying weakness in demand," she
said in her speech.
     -When London School of Economics professor Tenreyro was appointed to the
MPC on July 5 2017 the initial take of some analysts was that she was a dove.
This view was based on slim evidence: she had previously said that Brexit would
have a negative impact on the UK economy and that she believed that the MPC
should be able to take Bank Rate into negative territory if required. 
     In fact, she appears to be dead centre on the committee. She signed up to
the majority view in November, backing the initial 25 basis point rate hike and
she is now arguing that any prolonged delay in the next hike raises the risks of
an inflation overshoot.
     -Tenreyro is sceptical about the benefits of MPC members publishing their
own rate forecasts. In response to a question from Market News she said that so
far Fed policy had been "uni-directional" - the debate there has all been about
when and precisely how much to tighten. She wants to see how the dot plot
performs if and when the data suggest policy may have to go in the opposite
direction to that originally shown in the plot.
     She said that there were good arguments on either side of the debate but "I
am not sure having a dot plot would be a good idea." 
     With only MPC member Gertjan Vlieghe publicly advocating that the committee
should publish its own rate forecasts the chance of it doing so under Mark
Carney's governorship look vanishingly small.
     -Tenreyro was guarded about the how things are stacking up ahead of the
June MPC meeting, with the decision set to be announced June 21. She said that
there had been "a slight slowdown in momentum" but that MPC members would be
learning more in coming weeks and "it is too soon to say."
     All eyes are on the August MPC meeting, when the committee will have
completed the quarterly inflation forecast round, rather than this month's one,
which is a stop-gap. Tenreyro's non-committal remarks underscore that an August
hike is very much data dependent.
     -MPC members are likely to steer clear of saying much of note on the
political risks arising from Italy that have been shaking up the euro area. The
BOE's central projections exclude such hard to quantify risks and they only
impact the forecasts directly through their impacts on asset prices, credit
spreads and such things as business and consumer confidence.
     While data overall "remain consistent with the robust global growth
incorporated in the MPC's May IR forecast. We will need to remain watchful on
this front, especially given recent increases in political uncertainty in Europe
(and the associated market reaction), which is another factor that does not
directly enter our models," Tenreyro said.
--MNI London Bureau; tel: +44 203-586-2223; email:
[TOPICS: M$B$$$,M$E$$$,MX$$$$,M$$BE$]
MNI London Bureau | +44 203-586-2223 |