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--BOE MPC Sees Economy Evolving Much As Expected; Downside Risks Cited
--MPC Member Extensions, Change See Dovish Camp Strengthened
By David Robinson
     LONDON (MNI) - LONDON (MNI) - The UK economy is performing pretty much in
line with the Bank of England's August projections, but protectionism and Brexit
uncertainty are downside risks, minutes from its monetary policy committee's
September meeting showed.
     While Bank staff revised their nowcast for Q3 growth to 0.5% on the quarter
from August's 0.4% estimate, the big picture contained in the August Inflation
Report of an economy growing at or above trend with little or no slack and
generating upward pressure on pay remained intact.
     The Bank's in-house data bolstered the view earnings growth is heading
higher, with its pay settlements data base showing private sector increases on
balance rising in 2018 compared to last year.
     While members voted unanimously to leave Bank Rate unchanged at 0.5%,
staffing changes appeared to give the MPC a more dovish complexion, with Deputy
Governor Jon Cunliffe getting a fresh term in office and independent member
Jonathan Haskel attending his first meeting.
     Haskel, a productivity optimist who has downplayed labour market pay
pressures, took over from Ian McCafferty, whose voting record placed him at the
hawkish end of the MPC spectrum.
     Cunliffe, the member with the most dovish voting record, was this week
given a renewed term taking him to October 2023, confounding speculation he
might call it a day.
     It was also announced this week that Governor Mark Carney, who has never
voted with the minority for a hike and has spearheaded a cautious approach to
tightening, agreed to extend his departure date by seven months until January
2020.
     Rising global trade tensions and Brexit uncertainty are also weighing on
the outlook.
     The Bank's agents' Q3 summary, published alongside the minutes, stated
"investment intentions for the next 12 months softened slightly, depressed by
economic and political uncertainty."
     Brexit concerns were cited by some firms as "a reason to put investment on
hold or divert it to other countries or subsidiaries."
     The MPC has consistently regarded Brexit as a potential supply side shock,
which makes its impact on policy uncertain. Shrinking supply coupled with demand
holding up could exert upwards rather than downwards pressure on the policy
rate.
     All of this adds to the sense that despite headline growth picking up a
touch and pay rising the MPC is likely to stay wedded to very gradual
tightening.
     The minutes contained no commentary on the likely timing of the next hike
or any warning markets may be underestimating the likely pace of tightening.
--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com
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