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MNI BOE Preview - Dec 2021: Risk Management to Favour Waiting

Uncertainty seems more elevated than in November (now driven by Omicron rather than the end of furlough). Waiting seven weeks for the first hike is unlikely to make much difference to the inflationary outcome in 2-years time.

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EXECUTIVE SUMMARY:

  • This week’s Bank of England MPC meeting would have probably been a straightforward decision had it not been for the emergence of the Omicron variant.
  • Since the November meeting, labour market data has come in even stronger than expected, with end-of-furlough tensions and wage growth elevated even now that base effects have largely evened themselves out.
  • Uncertainty seems more elevated now than in November when the MPC kept rates on hold (now driven by Omicron rather than the end of furlough). At this stage a lockdown or other harder governmental restrictions cannot be ruled out, and waiting seven weeks for the first hike is unlikely to make much difference to the inflationary outcome in 2-years time.
  • We also include summaries of 21 sell-side analyst notes.
Full document:

MNI BoE Preview - Dec21.pdf