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--Five Things We Learnt From BOE MPC Members At TSC
By David Robinson
     LONDON (MNI) - The following are five things we learnt from the evidence of
four Bank of England Monetary Policy Committee (MPC) members -- Governor Mark
Carney, Deputy Governor Dave Ramsden and externals Gertjan Vlieghe and Michael
Saunders -- at the Treasury Select Committee Tuesday.
     -The majority on the MPC is opposed to publishing a rate forecast, while
Vlieghe came out in favour of it. Ramsden said that there was a risk of
confusion that an MPC rate projection would be seen as a promise and that the
committee's current communication was "working well." Saunders said that he was
concerned about false precision in producing a quarter-by-quarter forecast. An
MPC rate forecast could not be so finely calibrated.  It was already public
knowledge that MPC member Ian McCafferty was opposed to publishing a rate
forecast, and Carney stressed that the majority are. The chances of the
committee publishing an in-house rate forecast near term appear to be
vanishingly small.
     -Saunders, who voted for a 25 basis point rate hike at the May meeting, did
not believe that the costs of waiting were great or that a pre-emptive hike was
needed. His belief instead was simply that the data and outlook justified
tightening now, with unemployment near its equilibrium rate and likely to head
lower. Saunders said he thought that inflationary pressures would be stronger
than consensus.  "I am not trying to get ahead of the curve," he said.
     -A key message from members of the majority no change camp at the TSC was
that they had simply wanted to wait-and-see how the data unfold after the soft
first quarter, when headline quarterly GDP growth fell to just 0.1% They were
not, necessarily, gloomier about the current state of the economy than Saunders
but they did not see any great risks to delaying a hike, with Carney saying he
did not believe economic circumstances had changed and Vlieghe arguing that the
costs of delaying a hike were very low. All of this suggests that if the data
firm between now and the August meeting a hike then would be on the cards.
     -Brexit remains a big unknown, but much of the impact is going to be felt
outside the MPC's three year forecast horizon. Saunders said he agreed with the
IMF and OECD that over the longer-term it would probably have a modest, negative
effect. Carney stressed that many of the expected effects lay well beyond the
MPC's policy horizon. The MPC's focus instead is on the way business and
households respond to unfolding Brexit developments, and here the evidence is
mixed. Ramsden noted that Bank survey evidence had found Brexit moving up the
list of firms' concerns but the impact on investment appears to be levelling
off. A hard Brexit is viewed by the Bank primarily as a financial stability
risk.   "We are confident that the financial sector can deal with the shock"
Ramsden said.
     -Carney appears to be committed to his plans to leave the Bank at the end
of June next year. He declined to be drawn on questions of whether he could stay
if Brexit unfolded in some disorderly way. 
--MNI London Bureau; tel: +44 203-586-2223; email:
MNI London Bureau | +44 203-865-3812 |