State Street Comments on Bank of England Monetary Policy Committee Meeting

In reaction to the Bank of England (BoE) Monetary Policy Committee (MPC) meeting, Tim Graf, head of macro strategy for EMEA at State Street Global Markets, and Alan Wilson, senior investment manager of active fixed income at State Street Global Advisors, offer their views.

Graf comments: “The downside surprise in June inflation figures looks a pivotal event in today’s outcome, with a rate hike now looking unlikely for the remainder of this year, probably much longer. Indeed, our gauges of online retail inflation, showing sharp deterioration in annual inflation rates, suggest the MPC can afford to wait and see if political uncertainty takes any further toll on already softening growth and inflation data.”

Wilson comments: “The BoE continues to walk the policy tightrope, balancing transitory inflation pressure against concerns Brexit uncertainty will eventually curtail domestic growth. Today, all eyes were on Super Thursday; would there be an intensification of the hawkish signalling we have seen over recent weeks? From today’s release, it is clear hawkish discontent has been somewhat tempered – weaker than expected growth, wage and consumer data since June’s meeting has given likeminded committee hawks food for thought. While speculation had grown that there could be further dissenting voters at August’s meeting – with BoE Chief Economist, Andrew Haldane and Governor, Mark Carney the obvious candidates – the hawks in waiting failed to bare their talons. Looking forward, the MPC will likely maintain its hawkish bias to encourage the market to dampen inflation expectations on its behalf. It is very unlikely this signalling will culminate in formal policy action, particularly in the early stages of the Brexit process. Learning lessons from the European Central Bank (ECB), the MPC will continue to tread lightly and resist the temptation of tightening amid transitory inflation pressure.”