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--Votes 9-0 For Unchanged Policy And Asset Purchases; No Disseting Views
--BOE Projections On One 25bps Hike In 3yrs Show Clear CPI Overshoot
     By David Robinson and Irene Prihoda
     LONDON (MNI) - The Bank of England Monetary Policy Committee voted 
nine-to-zero to leave policy unchanged at its May meeeting, with the 
Inflation Report projections showing inflation overshooting the 2.0% 
target on the assumption of a single 25 basis point hike in three years.
    The following are key points from the BOE MPC minutes, Inflation 
Report and policy decision:
    -The minutes confounded market speculation that there would be at 
least one dissenting vote for a hike, or that there would be dissenting 
views in the minutes with one or more members setting out the case for 
early tightening.
     Not only did the minutes reveal a nine-to-zero vote for unchanged 
policy but no-one outlined a case for early tightening, with the MPC 
comfortable sitting tight for now. "The cost of waiting for further 
information was relatively low," the minutes said. 
    -The Inflation Report, however, was far from dovish. It showed the 
output gap turning from slightly negative to positive, with 1% excess 
demand in three years' time.
     A 1% positive output gap is relatively large and the Inflation 
Report showed inflation moving steadily higher in the second and third 
years of the forecast. 
     -Inflation on the target measure was shown falling below target in 
Q3 and reaching its low point of 1.63% in Q4 2019. It was then projected 
to stay below target through 2020, rising to 2.05% in Q2 2021 and 2.16% 
in Q2 2022.  
     The undershoot of inflation near-term reflected a mix of lower than 
anticipated domestic energy costs and firmer sterling pushing down on 
import prices.
    -The MPC did not make any comments directly addressed to current 
market rate assumptions. This is in part because there is no easy fit 
between the BOE projections and market assumptions over Brexit.
     The  Inflation Report projections were again conditioned on the 
assumption that the UK would have a smooth transition to an average of 
Brexit end states, while market pricing includes the possibility of a 
disorderly no deal Brexit.
   -The possibility of larger than usual short-term volatility in UK 
data was highlighted in the Inflation Report and was linked to recent 
stockbuilding ahead of Brexit. UK GDP was anticipated to have risen by 
0.5% in Q1 2019 reflecting a short-term boost due to stockpiling. GDP is 
expected to decelerate in Q2 to 0.2%, as companies may not continue 
expanding stocks. 
     The Bank's Agents' survey results are in line with other survey 
evidence emphasizing the greater than usual growth rate of stocks. 
--London Bureau; e-mail: 
[TOPICS: M$B$$$,M$$BE$,MT$$$$]