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BoE leaves policy unchanged: Awaiting Brexit vote - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 14, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – James Knightley, Research Analyst at ING, notes that the Bank of England has left monetary policy unchanged with Ian McCafferty the only MPC member opposing the decision to leave bank Rate at 0.5%.

    Key Quotes

    “He continues to cite rising domestic costs and a recent weakening in sterling, which were “likely to lead to inflation exceeding the target in the medium term than was embodied in the Committee’s collective November projections”. However, the rest of the MPC highlighted the likely persistence of the headwinds restraining economic growth following the financial crisis”.

    The lower oil price also meant that inflation was likely to depress inflation in the near-term while recent wage growth numbers have softened and the 3Q GDP number was clearly disappointing. Nonetheless, the Committee suggest that most economic indicators had “remained healthy”.

    The upcoming problem is the anticipated Brexit vote. The uncertainty that the vote will generate is likely to see a loss of momentum in the UK economy. Both UK and foreign businesses are likely to take a “wait and see” approach to hiring and investment while consumer spending and confidence could weaken modestly. Consequently we take the view that the BoE will sit on its hands and sterling is likely to continue softening in the build-up to the vote. If the vote is held in June (and the UK votes to remain in the EU) we look for a November move. If the UK leaves it is likely to be substantially later.”
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