MNI GLOBAL MORNING BRIEFING: BOE and ECB Meetings to Fore

Thursday's main points of focus will be the policy meetings at the BOE and the MPC, with policymakers set to deal with inflation surges in differing ways.

Bank Eyes Hike, Natural Rolloff (1200GMT)

The Bank of England looks set to raise Bank Rate by 25 basis points for a second meeting in a row this week, taking it to the 0.5% threshold for it to begin reducing the size of its balance sheet, and to open the door to another hike in May.

Governor Andrew Bailey and colleagues on the Monetary Policy Committee are likely to signal that swift tightening should avoid the need to act more aggressively later, though rate path projections in the accompanying Monetary Policy report may do little to reduce market doubts over where Bank Rate will conclude the year.

With analysts debating whether the policy rate is likely to see in 2023 at 1% or 1.25%, the MPC’s projection assuming unchanged policy is likely to show inflation overshooting the 2% target, but the market rate path could show inflation close to, or even slightly beneath, target, possibly indicating that investors are overestimating the pace or extent of future tightening.

Despite some market speculation that the looming redemption of the Bank’s GBP27.94 billion in March 2022 gilts might prompt a delay to start of the natural runoff of its balance sheet, tightening guidance issued in August indicated that an end to reinvestment of the proceeds of maturing bonds was almost certain once the policy rate hit 0.5%, and any change to this stance would only confuse the BOE’s messaging. It will decide whether to actively sell gilts once the rate reaches 1.0%.

ECB Seen On Hold Despite Inflation Pick-up (1245GMT)

European Central Bank President Christine Lagarde is likely to push back against market expectations for a 2022 rate hike after Thursday’s meeting despite a surge in inflation, but will stress that policymakers are playing close attention to incoming data and will be flexible if necessary.

With little appetite among Governing Council members for changes to policy so soon after December’s major announcements and before March’s economic projections, Lagarde will also be unlikely to signal any reduction in the planned pace of the Asset Purchase Programme, which is due to increase to EUR40 billion a month in the second quarter.

Thursday's main data points include the release of final services PMIs, euro zone PPI, US jobless claims and ISM services Index.

Bank of England Governor Andrew Bailey and ECB President Christine Lagarde are set to speak post-meetings Thursday

Date	GMT/Local	Impact	Flag	Country	Event
03/02/2022	0700/0200	*		TR	Turkey CPI
03/02/2022	0815/0915	**		ES	IHS Markit Services PMI (f)
03/02/2022	0845/0945	**		IT	IHS Markit Services PMI (f)
03/02/2022	0850/0950	**		FR	IHS Markit Services PMI (f)
03/02/2022	0855/0955	**		DE	IHS Markit Services PMI (f)
03/02/2022	0900/1000	**		EU	IHS Markit Services PMI (f)
03/02/2022	0930/0930	**		UK	IHS Markit/CIPS Services PMI (Final)
03/02/2022	1000/1100	**		EU	PPI
03/02/2022	1200/1200	***		UK	Bank Of England Interest Rate
03/02/2022	1230/1230			UK	BOE post-MPC Press Conference
03/02/2022	1245/1345	***		EU	ECB Deposit Rate
03/02/2022	1245/1345	***		EU	ECB Main Refi Rate
03/02/2022	1245/1345	***		EU	ECB Marginal Lending Rate
03/02/2022	1330/0830	**		US	Jobless Claims
03/02/2022	1330/0830	**		US	Preliminary Non-Farm Productivity
03/02/2022	1330/0830	**		US	WASDE Weekly Import/Export
03/02/2022	1330/1430			EU	ECB post-policy meeting presser
03/02/2022	1345/0845			US	Senate hearing on Federal Reserve nominees
03/02/2022	1445/0945	***		US	IHS Markit Services Index (final)
03/02/2022	1500/1000	***		US	ISM Non-Manufacturing Index
03/02/2022	1500/1000	**		US	factory new orders
03/02/2022	1530/1030	**		US	Natural Gas Stocks
03/02/2022	1630/1130	**		US	US Bill 04 Week Treasury Auction Result
03/02/2022	1630/1130	*		US	US Bill 08 Week Treasury Auction Result