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ELECTION WATCH

EUROZONE T-BILL ISSUANCE

Bill Supply For W/C Sep 20, 2021

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(Z1) Remains Below Recent Highs

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Goldman Sachs note that "on one end of the spectrum, external MPC member Saunders expressed a relatively pessimistic view of covid's impact on the supply potential of the economy, arguing that there is currently very limited slack and hinting that he will vote against the continuation of the BoE's QE programme at the August meeting. On the other end of the spectrum, external member Haskel estimates that the impact of the pandemic on potential GDP lies between -1.5% and +1.5%, with the midpoint being somewhat more sanguine than the assumption underlying the May MPR projections. Haskel argued that the high inflation prints are temporary, and stated that now is not the time to tighten policy. Deputy governers Ramsden and Broadbent, meanwhile, expressed a more balanced view. In our view, the core of the committee remains convinced that there is spare capacity in the economy and that the recent high inflation readings are temporary. We therefore think the core of the committee continues to lean against an early tightening of monetary policy given risk management considerations and the need to wait to see more data. We continue to expect the BoE to announce that they intend to switch up the sequencing of exit, with balance sheet unwind coming ahead of liftoff, but have less conviction on the timing of the announcement. Given Broadbent's comment that there will be news "soon", we maintain our expectation for an August announcement on exit sequencing, but we now see this as a close call, with November a potential alternative announcement date."