18 Feb 2015
MPC Minutes; market reaction diluted - RBS
FXStreet (Guatemala) - Analysts at RBS noted that as is often the case that MPC Minutes following a quarterly Inflation Report bring little news.
Key Quotes:
"This appears to have been the case in February 2015."
"As expected, the policy votes were unanimous (as in January). There was perhaps a smidgen of additional clarity about the hawks’ thinking, with the Minutes noting that for these members (Mssrs Weale & McCafferty, presumably) ‘there could well be a case for an increase in Bank Rate later in the year.’ Equally, this does not seem materially different from the observation made in January and repeated in February that their decision was ‘finely balanced’."
"If anything, the February text reads a little more dovishly – ie, even the two most hawkish policymakers do not regard a rate hike in 2015 as inevitable. On the dovish wing of the Committee, one member (David Miles probably) felt that ‘the next change in the stance of monetary policy was roughly as likely to be a loosening as a tightening.’ All members regarded a rate hike over the next 23 years ‘as more likely than not’ – though this hardly helps anyone trading sterling interest rate futures."
"The key issue remains ‘developments in domestic cost growth. . . especially manifest in wages’. Whereas the disinflationary energy prices influences are likely to be temporary, there could be ‘a more enduring influence on inflation in the medium-term’ from this source. As things stand, the MPC remains fairly cautious, agnostic even, with ‘risks on either side of this outlook’."
"Most of the February Minutes simply echoed the Inflation Report and the Governor’s open letter. They reiterated that the Bank could, if required, restart QE and that the effective zero-bound for Bank Rate was no longer 0.5%: ‘The UK banking sector was now operating with substantially more capital than in the immediate aftermath of the crisis.’"
"Overall, a fairly neutral and news-light set of Minutes – no less welcome for that. The next move in monetary policy is likely to be a tightening, but the chances of a Bank Rate rise in 2015 continue to look fairly remote. We stick with our forecast for the first 25bp increase to come in February 2016."
Key Quotes:
"This appears to have been the case in February 2015."
"As expected, the policy votes were unanimous (as in January). There was perhaps a smidgen of additional clarity about the hawks’ thinking, with the Minutes noting that for these members (Mssrs Weale & McCafferty, presumably) ‘there could well be a case for an increase in Bank Rate later in the year.’ Equally, this does not seem materially different from the observation made in January and repeated in February that their decision was ‘finely balanced’."
"If anything, the February text reads a little more dovishly – ie, even the two most hawkish policymakers do not regard a rate hike in 2015 as inevitable. On the dovish wing of the Committee, one member (David Miles probably) felt that ‘the next change in the stance of monetary policy was roughly as likely to be a loosening as a tightening.’ All members regarded a rate hike over the next 23 years ‘as more likely than not’ – though this hardly helps anyone trading sterling interest rate futures."
"The key issue remains ‘developments in domestic cost growth. . . especially manifest in wages’. Whereas the disinflationary energy prices influences are likely to be temporary, there could be ‘a more enduring influence on inflation in the medium-term’ from this source. As things stand, the MPC remains fairly cautious, agnostic even, with ‘risks on either side of this outlook’."
"Most of the February Minutes simply echoed the Inflation Report and the Governor’s open letter. They reiterated that the Bank could, if required, restart QE and that the effective zero-bound for Bank Rate was no longer 0.5%: ‘The UK banking sector was now operating with substantially more capital than in the immediate aftermath of the crisis.’"
"Overall, a fairly neutral and news-light set of Minutes – no less welcome for that. The next move in monetary policy is likely to be a tightening, but the chances of a Bank Rate rise in 2015 continue to look fairly remote. We stick with our forecast for the first 25bp increase to come in February 2016."