Goldman Sachs: BoE To Hike In Sep, Uncertainty Beyond.

Goldman Sachs note that “we head into the September MPC meeting with the tension between dovish BoE communication and the data essentially unresolved.”

• “Our economists continue to think the overall data assessment calls for further tightening.”
• “But tentative signs of labour market softening, such as the recent increase in the unemployment rate, and sequentially lower inflation may offer some room to a BoE that had set a low bar to pause in its tightening cycle.”
• “At this week’s meeting we expect the MPC to announce an increase in the pace of gilt portfolio unwind to £90bn over 12 months.”
• “Risks are likely skewed to the upside here, as Governor Ramsden repeatedly presented a benign assessment of the consequences of QT in terms of market functioning. We expect this to contribute to the increase in term premium in the gilt curve and see cheaper gilts against swaps.”
• “Beyond next week’s meeting, we think the BoE will likely be on hold.”