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Would a delay to active gilt sales make 75bp more likely?

BOE
  • Out of the major central banks, the Bank of England over the past 12 months has probably made the least effort to make the market prepared for its policy decisions - and done little to correct market expectations going into meetings.
  • As a case in point, look back to the end of 2021 when markets were expecting a hike in November due to communication from Governor Bailey (among others) but failed to raise Bank Rate. Contrast this with the Fed's "media signpost" via Nick Timiraos ahead of the June meeting to push market expectations in line with the 75bp that was announced.
  • So if the Bank of England disappoints the market by delaying active gilt sales we don't necessarily think that will make them want to "compensate" the market by doing more on Bank Rate instead. This is particularly the case if the decision is merely delayed until November when there will be better information on the gilt remit and how much headroom there is in the market for the BOE to add to gilt sales.
  • Of course, MPC members may think that a larger hike would be appropriate and if they are not announcing the start of gilt sales tightening elsewhere is needed - but we don't think the market's reaction will be at the forefront of their minds as they make this decision.
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