5 Things to Watch at the BOE Meeting
The Bank of England is expected to keep its benchmark interest rate steady Thursday
The Bank of England is expected to keep its benchmark interest rate steady Thursday and refrain from adding to the stimulus measures it announced in August in the wake of the U.K.’s Brexit vote. But after a run of decent economic data, investors will be looking for clues to the central bank’s next steps in the minutes of officials’ deliberations. Here are what to expect and what to look out for:
1. Rates
The BOE is expected to keep its benchmark interest rate steady in September after cutting it to to a new low of 0.25% in August. The cut was the centerpiece of a package of measures to cushion the economy following voters’ surprise decision to take the U.K. out of the European Union.
2. QE
The BOE also revived its long-dormant asset-purchase program and announced it will scoop up corporate bonds as well as government debt. Some of the names on a list of possible purchases raised eyebrows when published earlier this week, as they included dozens of non-British firms. The BOE says they all make a “material contribution” to the U.K. economy. It isn’t expected to add to the program this week, but investors will be alert for any discussion of its likely effects and any reflection on a brief hiccup officials experienced when trying to buy some types of bonds in August.
3. Economy
Gov. Mark Carney and other central bank officials were accused by the pro-Brexit camp in the run-up to the U.K.’s referendum on EU membership June 23 of scaremongering over the possible economic costs of quitting the 28-member bloc. A run of recent data on manufacturing, retail sales and the labor market suggests the economy has shrugged off the surprise result, and the Monetary Policy Committee’s statement will be closely parsed for any sign the BOE’s medium- and longer-term assessment of the possible consequences have changed as a result. In recent testimony to lawmakers, Mr. Carney pointed out the BOE expected healthy growth in the economy this year, but slower growth in 2017 as uncertainty over the U.K.’s prospects begins to weigh on spending and investment.
4. Dissent
The nine-member MPC that sets U.K. interest-rate policy wasn’t united on all the steps Mr. Carney unveiled in August. How their thinking is shaping up will be closely scrutinized. Thursday’s minutes will also offer the first insights into Michael Saunders’ stance on policy. The former Citi economist joined the panel in September.
5. Further Easing
The BOE telegraphed strongly in August that it expects to cut its benchmark rate againbefore too long if the economy develops as it expects. Most economists have penciled in November as the likely month for action. Whether that expectation still stands will be the critical piece of information in the minutes. Investors will also be alert for statements detailing precisely where officials expect their benchmark rate to settle. Mr. Carney has said he is “not a fan” of negative rates.
Source: WSJ
