BoE policy meeting should be less eventful for the pound – MUFG

Lee Hardman, Currency Analyst at MUFG, suggests that the BoE will be the next major central bank today to update their outlook for monetary policy.

Key Quotes

“Unlike the Fed we are expecting the BoE to maintain an unchanged monetary policy stance which should have a more modest impact on the pound. The BoE shifted to as neutral policy stance at their last meeting in November when it signalled that the risks to their inflation outlook had become more balanced which prompted it to drop their easing bias. The shift to a more neutral policy bias and their display of greater unease over the inflationary impact of the weaker pound has helped the pound to rebound over the past month.”

“The recent strengthening of the pound is helping to ease upside risks to inflation although it still remains at significantly weaker levels. In contrast, the ongoing rebound in the price of oil lifted by the recent OPEC and non-OPEC joint agreement to cut production has increased upside risks to inflation. The UK economy is still holding up better than expected in the near-term. Employment weakness evident in yesterday’s labour market report likely exaggerates the scale of slowdown but will have to be monitored closely in coming quarters to assess if it is sending a signal of a potentially sharper economic slowdown next year. In these circumstances, we expect the BoE to remain in wait and see mode for now.”