MNI 5 THINGS: Haldane Joins BOE MPC Dissent; New QE Guidance

By David Robinson and Jamie Satchi

     LONDON (MNI) - The following are the key points from the June MPC monetary

policy decision and accompanying minutes, published Thursday by the Bank of

England:

     - The split between Bank of England Monetary Policy Committee members grew

at its June meeting, with Chief Economist Andy Haldane joining resident Hawks

Ian McCafferty and Michael Saunders in feeling an immediate 25bp Bank Rate hike

was appropriate. The Committee were unanimous in voting to keep the stock of

asset purchases unchanged but did alter its guidance on this.    

     - This was the first time Haldane had dissented during his tenure on the

MPC and the first time a Bank insider had dissented on a Bank Rate since 2011

when Haldane's predecessor Spencer Dale voted against the majority.

     - The MPC altered its guidance on QE, lowering the threshold for the

commencement of QE unwind. Balance sheet reduction will begin when Bank Rate is

around 1.5%, and not the 2.0%-mark previously set out in November 2015 (when the

MPC last provided guidance on this). Justifying the alteration, the Committee

cited the lower effective lower bound for the Bank Rate now compared to then.

Still, text from the minutes seem to imply that the Bank Rate remains the

Committee' primary monetary policy tool, leaving the reduction of the stock of

assets to tick over in the background "at a gradual and predictable pace".    

     - For hawks Haldane, McCaffery and Saunders, there was a "higher degree of

confidence" that the Q1 slowdown was temporary and would be largely unwound and

that the benefits in waiting for extra information "were limited". The trio

cited upside risks to average weekly earnings and unit wage costs from the

latest labour demand and pay data.          

     - For the majority of voters, data since the May meet had "given them

greater reassurance that the softness of activity in the first quarter had been

largely temporary", highlighting a strong recovery in household spending. While

conceding official manufacturing data had come in weak, they were encouraged by

sector business surveys which pointed to steady underlying growth. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMUFE$,M$B$$$,M$E$$$,M$U$$$,M$$BE$]