Goldman: BoE Now Less Data-Dependent, Further Curve Steepening Likely

Goldman Sachs note that “BoE chief Economist Pill indicated that the ‘finely balanced’ nature of future rate decisions means that markets should no longer expect sharp policy variation around near-term data surprises.”

• “This reinforces our view that the BoE will now be on hold, but does mean that volatility is now likely to travel further out the UK curve on macro data surprises.”
• “Further declines in wages and CPI this week would suggest a steeper curve, and with the BoE reticent to hike further, this skews the risks to the front-end lower.”
• “We think that asset swap tightening will continue to occur, however, which points to more downside risks to OIS forward yields than front-end Gilts.”