MNI 5 Things: MPC Indicates Slightly Hawkish Shift

By David Robinson, Jamie Satchi and Jai Lakhani

     LONDON (MNI) - The following are the key points from the Bank of England

(BOE) November Monetary Policy Committee (MPC) meeting and Inflation Report:

     - As widely anticipated, the MPC voted unanimously to keep the Bank Rate at

0.75% and to leave the asset purchase programme unchanged at gbp475bn. In the

accompanying Inflation Report, the committee's main projections were left

broadly unchanged.

     - However, the OIS-implied path used in these projections contained just

over one further 25bp hike compared to the one used in August. In other words,

CPI was seen remaining above target throughout the forecast horizon, despite

accounting for an additional 25bp hike, suggesting a slightly hawkish shift from

the MPC.

     - In the eyes of the MPC, the economy is now running at full capacity,

meaning slack has evaporated. Furthermore, excess demand is seen setting in

earlier than projected two months ago, consistent with higher domestically

generated inflation. A positive output gap is seen emerging one year from now,

in Q4 2019, almost a year earlier than August's projection of Q3 2020.

     - The MPC said that momentum in household consumption appeared "greater

than previously expected." While tighter credit conditions have reduced annual

consumer credit growth, an anticipated uptick in real incomes should mean that

consumption grows more sustainably, rather than via unsecured lending.

     - The recent rise in average weekly earnings (AWE) prompted the MPC to

upwardly revise its August estimate for 2018 by 25bps to 2.75%. However,

earnings growth in future years is seen in line with the August projections, as

low productivity is expected to weigh. AWE growth is seen rising to 3.75% by

2021.

--MNI London Bureau; +44 207-862-7489; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MC$$$$,M$$BE$]