BOE to keep rates unchanged, next rate move to be downward – Societe Generale

The Societe Generale Analysts offer a detailed preview of the Bank of England (BOE) monetary policy decision that will be announced on Thursday at 1100 GMT alongside the minutes of the meeting.

Key Quotes:

“In recent days, several MPC members have made comments that imply that they might soon be ready to vote for a rate increase. That seems to be based mainly on the state of the labor market. We accept that the temperature of that market is rising. 

However, the upside risks to inflation that this implies should be considered against the background of the escalating trade war and the serious risk of heightened Brexit uncertainty in the autumn when a new leader of the Conservative party starts to put into practice what is likely to be a harder stance towards the EU. 

So, despite some hawkish MPC comments, the MPC is likely once again to vote unanimously for unchanged policy at this week's meeting. 

Our forecast is that the next move in rates will be downward, not upward, and will come in the second half of next year as the US enters a mild recession. Moreover, this already-dovish forecast is made on the assumption that a No Deal is avoided. If not, then easing should be earlier and more aggressive than in our base case.”