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Morgan Stanley view ahead of this week's MPC meeting

BOE
  • MS expects a 9-0 vote for unchanged policy and the focus to be on negative rate guidance. MS expect the BOE to stress "that rate cuts are part of its tool kit and that the review into negative rates will be completed by November, a clear sign of further action then."
  • Overall, MS look for the doves to "prevail" over hawks who see a V shaped recovery and are concerned about the balance sheet. MS look for "expect a dovish message paving the way for November action"
  • MS sees "a chance of reverting to conditional guidance" and notes that "the guidance could be that should unemployment spike beyond a certain threshold (e.g. 7%) in the coming months the MPC will take further action."
  • On forecasts: "in place of just one provisional scenario, we assume we will get the GDP and inflation fan charts, and quarterly profiles."
  • MS continues to expect a further GBP100bln of QE, a 10bp rate cut to 0% and negative funding available on the TFSME. "Both the rate cut and more QE, we think, will come in November."
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