MNI GLOBAL MORNING BRIEFING: BOE Set Fair For Hike

Another two central banks are due to meet Thursday, with the SNB set to again leave rates in negative territory whilst the BOE hikes 25bp.

Recap: FOMC Meeting

Federal Reserve Chair Jerome Powell Wednesday said another 0.75-percentage-point rate increase is possible in July as the central bank refreshed its projections showing its path to a restrictive stance that could reach nearly 4% in 2023, our DC bureau wrote Wednesday.

“I do not expect moves of this size to be common," Powell said in a press conference after delivering the first supersized 75 basis point increase since 1994, bringing the fed funds rate range to 1.50%-1.75%. "Either a 50 basis point or a 75 basis point increase seems likely” at the next meeting, he said about July, adding that he wants to be in restrictive territory this year.

Fed policymakers also saw interest rates rising substantially more than they had predicted in March, with the median forecast for the fed funds rate ending the year at 3.4% and 2023 at 3.8%, before moving down to a still-elevated 3.4% in 2024. The Fed kept its 2.5% estimate for a longer-run neutral rate.

Futures markets were pricing in a 65% chance of another 75 bp move in July following the meeting and Powell's briefing.

Recap: ECB’s Ad Hoc Meeting

The Governing Council yesterday confirmed they will apply flexibility in reinvesting PEPP redemptions and accelerate the completion of the design of a new anti-fragmentation instrument.

Swiss National Bank Rate Decision (0830 BST)

The SNB is geared to leave policy unchanged once again, with the policy and deposit rate to remain at -0.75%.

The SNB is expected to lay the groundwork for the first change to the policy rate in seven years at today’s meeting. But the bank will likely hold rates for a further three months so as not to add to market uncertainty by prematurely widening the ECB/SNB policy rate differential and inducing FX market volatility. A substantial upgrade to inflation projections is due at this meeting, calling for an exit from negative rates at the end of 2022.

For MNI’s comprehensive preview click here.

Italy Final CPI (0900 BST)

Modest upticks could be seen on today’s Italian final inflation print, set to confirm accelerations of +0.9% m/m and +7.3% y/y in May.

Bank of England Rate Decision (1200 BST)

A 25bp hike is fully priced in by markets for today’s BOE policy decision, bringing the policy rate to 1.250%. Markets will be looking for a significant portion of members having voted for 50bp as a hawkish indication for upcoming hikes. The probability of a 50bp hike for today’s meeting lies around 1/3.

Market pricing for August has increased significantly, now fully pricing a 50bp hike in one of the next two MPC meetings following the May MPC meeting, last week’s more hawkish ECB meeting and upside surprise in US CPI. Click here for the in-depth MNI preview.

US Housing Starts & US Weekly Jobs Report (1330 BST)

Housing starts and building permits are set to fall by around 30-40k in May, contracting by -1.8% m/m and -2.5% m/m respectively as the US housing market slows. Surging input prices and supply chain disruptions have hampered construction. Alongside mortgage rates at 30-year highs and waning consumer demand outlooks remain muted.

In the US labour market, initial jobless claims for the week ending June 11 are to step down by 10k to 219k, following the surprise 27k uptick seen the week before. Continuing claims for the week prior should plateau around 1307k, on par with the previous two weeks and hinting further at the US labour market reaching saturation.

US Philadelphia Fed Manufacturing Survey (1330 BST)

A 2.4-point uptick to 5.0 is anticipated for the Philly Fed manufacturing index in June, a minimal recovery on May’s two-year low, where 20% of firms noted less activity.

Thursday’s key policymaker appearances are from the ECB, with President Lagarde and board member Fabio Panetta taking part in the Eurogroup meeting, and Fabio Panetta and Luis de Guindos speaking again later in the morning.

BOE Policy Rate in perspective over the last 15 years:

Source: Bloomberg, BOE

Date	GMT/Local	Impact	Flag	Country	Event
16/06/2022	0730/0930			CH	SNB interest rate decision
16/06/2022	0730/0930	***		CH	SNB policy decision
16/06/2022	0750/0950			EU	ECB Panetta Speech & Q&A at European Payments Council
16/06/2022	0800/1000	**		IT	Italy Final HICP
16/06/2022	0830/1030			EU	ECB de Guindos at Osservatorio Giovani-Editori Conference
16/06/2022	1100/1200	***		UK	Bank Of England Interest Rate
16/06/2022	-			EU	ECB Lagarde & Panetta at Eurogroup Meeting
16/06/2022	-			JP	Bank of Japan policy meeting
16/06/2022	1230/0830	**		US	WASDE Weekly Import/Export
16/06/2022	1230/0830	**		US	Jobless Claims
16/06/2022	1230/0830	**		US	Philadelphia Fed Manufacturing Index
16/06/2022	1400/1000	***		US	Housing Starts
16/06/2022	1430/1030	**		US	Natural Gas Stocks
16/06/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
16/06/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result