GBP/USD[1], BOE Price Analysis & News
- GBP[2] Bulls Disappointed on 8-1 Vote Split
- BoE Stick to Transitory Inflation Narrative
- BoE Pushback Against Early Tightening Calls
BOTTOM LINE: As widely expected the Bank of England maintained current monetary policy in a 9-0 vote with the interest rate left at 0.1%. Once again, Andy Haldane, was the only hawkish dissenter on QE, voting to cut the APF target by GBP 50bln. As a reminder, Haldane will leave his post as Chief Economist after this meeting. As such, given that markets had been positioned for a hawkish surprise, following the recent FOMC[3] meeting with reports doing the rounds that the BoE should scrap QE (The Time Shadow MPC) adding to the crowded long GBP, an 8-1 vote split of QE was subsequently a disappointment for GBP bulls, prompting cable to fall to session lows.
GROWTH: Bank staffs upgraded the level of Q2 GDP by around 1.5ppts since the May report and thus output in June is expected to be around 2.5% below its pre-Covid level. This is largely a reflection of the recent swathes of firm data since the May meeting.
INFLATION: In light of inflation rising above the BoE’s target sooner than expected, the BoE now see inflation likely exceeding 3% (previously saw a peak of 2.5%) for a “temporary” period.
MONETARY POLICY: While central bank’s have begun to shift in a more hawkish manner (most notably the FOMC), the BoE highlighted that policy should lean strongly against downside risks to the outlook and ensure that the recovery was not undermined by a “premature tightening in monetary conditions”. The BoE pushing back against the view that the Bank could look to tighten policy sooner rather than later.
MPC BALANCE: As the only hawk
