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11 Dec 2015
BoE: Key takeaways from the policy decision – Goldman Sachs
FXStreet (Delhi) – Andrew Benito, Research Analyst at Goldman Sachs, notes that as expected, the MPC left Bank Rate unchanged in today’s policy announcement while there continued to be one dissenting vote on the Committee for an immediate 25bp rise in Bank Rate.
Key Quotes
“In the Minutes, the Committee reiterated the messages of the November Inflation Report. The Committee aims to avoid the inflation overshoot that was forecast last month, conditional on market rates. Yet, recent falls in oil prices continue to imply a subdued outlook for inflation until the second half of next year.
• The tone of the Committee’s monetary policy summary is neutral. The statement largely restates previous messages with few significant changes from the previous month. In the most notable change, the Committee notes that nominal wage growth has “flattened off“.
• On activity, the Committee noted that there had “not been much news on international activity or on domestic sources of growth in the past month. External downside risks to activity, introduced in the November Inflation Report projections, continued to apply.
• On inflation, the Committee recognises that recent falls in oil prices would, if they were to persist, imply that “the expected path of CPI inflation in the spring would be slightly lower“. The Committee continues to note that “CPI inflation was expected to remain below 1% until the second half of next year“.
• In the most notable change in the minutes, the Committee notes that growth in average weekly earnings was somewhat weaker than expected in the November Inflation Report, as pay growth “had flattened off recently.”
• The Committee continues to emphasise that it aims to “return inflation to target sustainably“ and “without an overshoot“ in inflation - which would be expected by the Committee were Bank Rate to follow the path priced by financial markets (i.e., as forecast in the November Inflation Report). Yet, that message is, in our view, neutralised by the Committee continuing to draw attention to the point at which CPI inflation is expected to reach 1%. The latter point, which tilts more dovish, becomes somewhat more important with recent falls in oil prices.”
Key Quotes
“In the Minutes, the Committee reiterated the messages of the November Inflation Report. The Committee aims to avoid the inflation overshoot that was forecast last month, conditional on market rates. Yet, recent falls in oil prices continue to imply a subdued outlook for inflation until the second half of next year.
• The tone of the Committee’s monetary policy summary is neutral. The statement largely restates previous messages with few significant changes from the previous month. In the most notable change, the Committee notes that nominal wage growth has “flattened off“.
• On activity, the Committee noted that there had “not been much news on international activity or on domestic sources of growth in the past month. External downside risks to activity, introduced in the November Inflation Report projections, continued to apply.
• On inflation, the Committee recognises that recent falls in oil prices would, if they were to persist, imply that “the expected path of CPI inflation in the spring would be slightly lower“. The Committee continues to note that “CPI inflation was expected to remain below 1% until the second half of next year“.
• In the most notable change in the minutes, the Committee notes that growth in average weekly earnings was somewhat weaker than expected in the November Inflation Report, as pay growth “had flattened off recently.”
• The Committee continues to emphasise that it aims to “return inflation to target sustainably“ and “without an overshoot“ in inflation - which would be expected by the Committee were Bank Rate to follow the path priced by financial markets (i.e., as forecast in the November Inflation Report). Yet, that message is, in our view, neutralised by the Committee continuing to draw attention to the point at which CPI inflation is expected to reach 1%. The latter point, which tilts more dovish, becomes somewhat more important with recent falls in oil prices.”