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Split vote expected this week

  • The upcoming week will be dominated by the Bank of England MPC meeting. Our full BOE preview will be out later this week but we note that Saunders is widely expected to vote to end gilt purchases early while there are also some expectations he could be joined by another member. So the consensus view seems to be a 7-1 vote with risks of 6-2 (note that there is still a vacant seat on the MPC as Haldane has not been replaced as Chief Economist.
  • In terms of the MPR forecasts, medium-term inflation forecasts are generally expected to remain around 1.9-2.0% with only marginal changes to growth forecasts outside of the immediate-term. There are also expectations from a number of analysts that with negative rates technically a viable option from the August meeting, that the Bank will use this as an opportunity to update the market on its views on sequencing for the tightening i.e. rates or QT first and any threshold for rates to reach before QT begins. On this, consensus largely expects either a threshold of Bank Rate at 0.25-0.50% or for the Bank to be more vague and not commit to a specific threshold. The last official guidance from the Bank was for QT to not begin until Bank Rate was at 1.50% but that was before the effective lower bound was moved into negative territory and has been rendered largely irrelevant from comments from many MPC members, including Governor Bailey.

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