MNI INSIGHT: BOE MPC Communications Compatible With Jan Cut

--BOE Enters Quiet Period With Only Carney, Externals Having Given Policy

Comments

--MPC's Haldane, Broadbent, Cunliffe Have Backed Rate Changes Before Without

Signalling Support

--"Coming Months" Phrase Used By Tenreyro Does Not Preclude Jan Move

By David Robinson

     LONDON (MNI) - The silence over a possible rate cut from four of the five

internal members on the nine strong Bank of England Monetary Policy Committee

does not tilt the scales against a move this month, MNI analysis of MPC members'

commentary shows.

     Three of those four internals have previously backed a rate change without

signalling support in the months ahead of the past two policy change meetings,

in November 2017 and August 2018. Deputy Governor Jon Cunliffe surprised by

voting for the August 2018 hike, for which Chief Economist Andy Haldane had also

first voted, without warning, in June that year. Deputy Governor Ben Broadbent,

who heads the Bank's monetary policy wing, has persistently offered at most

limited guidance, having declared his opposition to "spoon feeding" analysts and

market participants.

     Past experience also shows that the silence of the internals is compatible

with no change. Broadbent recommends looking at the data flow and seeking to

understand the MPC's reaction function.

     But two external MPC members voted for a cut at the BOE's December meeting,

and the other two have since said they are open to easing. The internals have

kept mum, and with the pre-meeting blackout starting on Monday, Jan. 20, they

will provide no further steers ahead of the policy announcement on Jan. 30.

     Deputy Governor Dave Ramsden did clearly signal he was likely to oppose the

November 2017 hike and support the August 2018 one, so it would be a break with

the past if he were to vote for a cut without first signalling it this month.

     Haldane appears to have offered no steer on policy in the three months

preceding the 2017 and 2018 hikes. Cunliffe did make pretty clear that he was

going to oppose the 2017 hike but was studiedly ambiguous in his public

commentary before the move in 2018.

     --EXTENDED BLACKOUT

     MPC communication ahead of this month's meeting has been constricted by the

Dec. 12 General Election, with the official electoral blackout period kicking in

on Nov. 6, before the November meeting's blackout had finished, preventing MPC

members doing the usual round of media appearances following the quarterly

forecast round.

     External MPC members Jonathan Haskel and Michael Saunders have both made

their policy stance clear by voting for easing at the November and December

meetings and making speeches this month setting out their reasoning.

     Their colleague Silvana Tenreyro said at a Resolution Foundation event on

Jan. 10 that "if uncertainty over the future trading arrangement or subdued

global growth continues to weigh on UK demand then my inclination is towards

voting for a cut in Bank Rate in the near term." When pushed on the timing, she

said "I am talking about the coming months."

     The "coming months" phrase appears to include this month's meeting. She

used it back in October 2017, telling the Treasury Select Committee that that if

the data evolved as expected she "would be minded to vote for a Bank Rate

increase in coming months" before voting for a hike the following month.

     BOE Governor Mark Carney made speeches to set out the contours of the MPC

debate on the MPC ahead of the two previous rate changes and he did so again

this month, floating arguments for and against a cut without coming down firmly

on one side or the other.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,MX$$$$,M$$BE$]