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MS View Ahead of the Sep MPC Meeting

BOE
  • MS notes that "there has been too little change in the outlook to expect a different message at a non-forecast meeting compared to the August one" and looks for a unanimous 9-0 vote for no policy change "with a risk of an early Saunders vote for more QE."
  • MS look for "the more decisive MPC shift to supporting further easing is likely to follow the budget and Brexit resolution. This suggests that the November MPC may just agree a modest roll-forward of APF purchases, given the still fragile outlook, with a later shift, perhaps in February, to the full package. In the end, though, we expect another £100 billion of APF purchases, allowing the programme to run through 2021, and a rate cut to ZIRP."
  • MS describe the "modest roll forward" of QE to be "perhaps a GBP30bln top-up".
  • Furthermore MS state that "Given the MPC's hawkish tone, and Bailey's apparent aversion to further balance sheet expansion, the risks look tilted to less and later action compared to our forecasts."
  • MS continues to look for a 10bp Bank Rate cut to 0% in February.
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