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Week Ahead (1/2)

UK
  • Any definitive data on the Omicron variant of Covid-19 will continue to be market moving but it looks increasingly likely that we will not have enough data for the MPC to feel comfortable to raise rates in December.
  • Governor Bailey last week gave little away on his views on the impact on monpol while when Mann was asked about the magnitude of the first hike she said that “its premature to even talk about timing” given the uncertainty of Omicron.
  • The most telling comments, however, were from Saunders. Recall that Saunders was the first MPC member to vote to end the QE programme early and was one of 2 MPC members to vote for a hike in November – so he is widely considered to be the most hawkish MPC member. Saunders would not be drawn on whether he would continue to vote for a hike in December – noting there were advantages to waiting to see more evidence on the public health outcomes but also noting that a delay to raising rates could be costly. However, ahead of the November meeting Saunders seemed much more certain that he would vote for a hike.
  • As we said last week, although we cannot place too much emphasis on interpreting one member’s comments and projecting to the rest of the MPC, if the most hawkish member of the MPC seems to not be sure whether he will vote for a hike anymore, it does seem to make it less likely that the median MPC member will vote for a hike.

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