Goldman Sachs See Policy Rate Lift-Off As Early As Next Week

Goldman Sachs note the large unfavourable June-July surprises increased very significantly the likelihood of very near-term policy rate normalisation lift-off (likely already at next week's Aug 12 MPC meeting).

• This would be consistent with the MPC's last meeting's guidance towards preserving just an accommodative stance while the impact of the pandemic on inflation and its drivers persist (as opposed to the previous guidance of preserving a highly accommodative/expansionary stance).
• GS argue that given that the policy rate is currently at an historical low 0.25% and the ex-ante real policy rate has continued to decline, a 25bp rate hike at the next meeting would in fact still maintain a highly accommodative/expansionary monetary stance.