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Skew in the forecasts the most surprising part of today's communication so far

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  • Reading between the lines, it looks as though the MPC had a hard time coming to an agreement on the MPR forecasts.
  • "The degree of restrictiveness of monetary policy could be less than embodied in the Committee’s current assessment. This was reflected in the risks around the August Report modal inflation projection being skewed somewhat to the upside throughout the forecast period. Mean CPI inflation was projected to be 2.0% and 1.8% at the two and three-year horizons respectively."
  • This is an upside skew of 0.3ppt to both the 2/3-year areas.
  • The way the Market team interpret this is that the MPC members voting for the cut were able to get the modal forecasts at 1.7% and 1.5% as they wanted - but that the more hawkish members insisted on the upside skew.
  • This is the most surprising part of the entire communication in my view, none of the analyst previews had been looking for this (although we had added a question to capture this risk on our High Speed Calendar for this meeting).
  • Note that the Bernanke review was scathing about the use of skew in its assessment of MPC communication - so we are surprised that the key 2/3-year forecasts reflect such a large skew - but it really does show the dividedness of the MPC.
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  • Reading between the lines, it looks as though the MPC had a hard time coming to an agreement on the MPR forecasts.
  • "The degree of restrictiveness of monetary policy could be less than embodied in the Committee’s current assessment. This was reflected in the risks around the August Report modal inflation projection being skewed somewhat to the upside throughout the forecast period. Mean CPI inflation was projected to be 2.0% and 1.8% at the two and three-year horizons respectively."
  • This is an upside skew of 0.3ppt to both the 2/3-year areas.
  • The way the Market team interpret this is that the MPC members voting for the cut were able to get the modal forecasts at 1.7% and 1.5% as they wanted - but that the more hawkish members insisted on the upside skew.
  • This is the most surprising part of the entire communication in my view, none of the analyst previews had been looking for this (although we had added a question to capture this risk on our High Speed Calendar for this meeting).
  • Note that the Bernanke review was scathing about the use of skew in its assessment of MPC communication - so we are surprised that the key 2/3-year forecasts reflect such a large skew - but it really does show the dividedness of the MPC.