BoE expected to stay on hold in July - RBS

By FXstreet.com | Updated July 30, 2014 AAA

FXStreet (Łódź) - According to Ross Walker, Senior UK Economist at RBS, the BoE is not expected to modify its monetary policy at the meeting next Thursday.

Key quotes

"Although the Governor signalled a ‘hawkish’ shift in policy guidance in his Mansion House speech on 12 June, the probability of any actual change in policy settings or an MPC statement in July is fairly remote – even Martin Weale, widely regarded as the leading ‘hawk’, said just a fortnight ago that he did not see the case for a hike in the ‘very near future’."

"Whilst our confidence in the BoE’s communication is much diminished – the risk of arbitrary shifts in policy guidance has increased materially – the Treasury Select Committee hearing on 24 June allowed the Governor and other MPC members to provide some clarification."

"Our take is that the Mansion House comments were intended to encourage markets to price in a >15% probability of a 2014 Bank Rate rise, not to signal that a November or December 2014 hike was now the most likely outcome."

"We altered our Bank Rate forecast following the Mansion House speech, bringing forward the timing of the first hike from August 2015 to February 2015 (with the risks skewed towards an earlier move in November 2014) and post-TSC are more comfortable with that call."

"There is unlikely to be much further light being shed in the coming week – we do not expect any statement – so the MPC Minutes on 23 July will become the main focal point."

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