MNI: 5 Things We Learned From November BOE QIR, MPC MINUTES>

     By Jamie Satchithanantham and David Robinson

     LONDON (MNI) - The following are the key points from the November 

Quarterly Inflation Report and the Monetary Policy Committee Minutes, 

released Thursday by the Bank of England:

     - The Bank of England Monetary Policy Committee's 7-2 vote in 

favour of a 25bp hike in the Bank Rate was as expected. The first rise 

in more than a decade, which reversed the cut made in the direct 

aftermath of the Brexit vote, was clearly signalled by the MPC and the 

two dissenters David Ramsden and Jon Cunliffe made their positions 

public before the meeting. The MPC members voted unanimously to keep the 

stock of its gilt and corporate bond purchase programmes unchanged, 

downgraded its growth projection and upgraded its inflation projection.       

     - Rates markets had priced in a 90% probability of a hike ahead of 

the announcement so much of the focus heading into 'Super Thursday' was 

on the vote split and the tone of the Minutes. Bank insiders Ramsden and 

Cluniffe did not feel domestic costs would rise in line with the MPC's 

forecast and thus voted for no change while Silvana Tenreyro, whom many 

had though may also opt join those dissenting following her comments 

made before the Treasury Select Committee, voted instead for a hike. For 

the majority of the MPC, spare capacity had eroded "if anything, a 

little more rapidly than the Committee had anticipated in its August 

projections", reducing their tolerance for above-target inflation.      

     - The Minutes themselves provided no further guidance on additional 

tightening other than repeating the line that any further increases in 

Bank Rate would be at a "gradual pace and to a limited extent". The 

September Minutes line that market expectations had probably been 

underestimating likely tightening was removed which, combined with a 

lack of emphasis on any near-term addition removal of stimulus, will 

likely be interpreted as dovish from the MPC. Inflation was expected to 

peak at 3.2% in October.        

     - GDP, CPI projections made by the Bank in the Quarterly Inflation 

Report were revised down slightly but were conditioned on a market path 

that implied two additional 25bp rate increases between now and Q4 2020. 

A more noticeable revision came in the Bank assessment of labour market 

slack. In August the jobless rat was seen rising back to the Bank's 

equilibirum level of 4.5%, before closing out the final three quarters 

of the forecast period at 4.4%. Three months later and this path was 

revised lower with the jobless rate seen dropping to 4.2% in Q4 2017 and 

remaining at this level for all but the last three months of the 

forecast horizon.        

- The MPC wants to see how this rate hike plays out without complicating 

it with fresh guidance. A box in the Inflation Report looked at 

household sensitivity to rate hikes, and suggested that they would not 

struggle as a result of this hike, but the November move will allow the 

MPC to monitor reactions.

 --London newsroom: 4420 7862 7491 e-mail: 

jamie.satchithanantham@marketnews.com

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