BoE: Focus of attention on the accompanying minutes - Scotiabank

Alan Clarke, Head of European Fixed Income Strategy at Scotiabank, suggests that while there is unlikely to be any change in BoE policy at the March meeting, the focus of attention will be on the accompanying minutes.

Key Quotes

“This meeting will mark the mid-point between the February and May Quarterly Inflation Reports (QIR). So what has changed? Has the Monetary Policy Committee’s tone evolved? Are we any closer to a dissent—especially in light of Kristin Forbes’s recent speech?”

“Data released since the February QIR have been mixed, but the disappointments were probably slightly more prominent than the upwards surprises. More specifically, the deterioration in the CIPS surveys, weaker-than-expected retail sales data and lower-than -expected CPI inflation data all stand out. The most important upwards surprise was the upwards revision to Q4 GDP, from 0.6% q/q to 0.7% q/q, albeit with downwards revisions to the back-data. Mathematically, the stronger-than-anticipated GDP reading for Q4 2016 implies a faster pace of GDP growth during 2017. Indeed, we revised our GDP growth forecast for 2017 up from 1.7% y/y to 2.0% y/y on the back of this data. The BoE’s 2% y/y growth forecast for 2017 looked heroic when it was published in early February, but could even be revised up slightly on the back of the revised Q4 GDP data.”

“Given this backdrop, there is unlikely to be much of a shift in the MPC’s tone at this meeting.”