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FPC Minutes due at 10:30GMT

BOE
  • The Bank of England's FPC Minutes from their quarterly meeting will be released at 10:30GMT today. There will be no Financial Policy Report released today (the last one was in December with the next due in June.
  • The main focus from the macro side will be whether the countercyclical buffer (CCyB) will be adjusted from its current level of 2% (it is not expected to be changed). We therefore do not expect a market reaction in either FX, gilts or STIR.
  • In December, the FPC Minutes noted that "The overall risk environment remains challenging, reflecting subdued economic activity, further risks to the outlook for global growth and inflation, and increased geopolitical tensions."
  • The following language will also be monitored for wider cross-asset impacts:
  • "UK borrowers and the financial system have been broadly resilient to the impact of higher and more volatile interest rates."
  • The December Minutes also noted that "household finances remain stretched by increased living costs and higher interest rates, some of which has yet to be reflected in higher mortgage repayments. Arrears for secured and unsecured credit remain low but are rising as the impact of higher repayments is felt by borrowers."
  • In terms of valuations: "Given the impact of higher and more volatile rates, and uncertainties associated with inflation and growth, some risky asset valuations continue to appear stretched."
  • "UK corporates’ ability to service their debts has improved due to strong earnings growth and the sector is expected to remain broadly resilient to higher interest rates and weak growth. But the full impact of higher financing costs has not yet passed through to all corporate borrowers, and will be felt unevenly, with some smaller or highly leveraged UK firms likely to remain under pressure. Corporate insolvency rates have risen further but remain low."
  • "The UK banking system is well capitalised and has high levels of liquidity. It has the capacity to support households and businesses even if economic and financial conditions were to be substantially worse than expected."
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