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UK monetary policy outlook
Andrew Goodwin Chief UK Economist agoodwin@oxfordeconomics.com Ian McCafferty Senior Adviser 5 February 2020
Markets saw last week’s decision as a close call
Questions: events@oxfordeconomics.com 2
UK monetary policy outlook Andrew Goodwin Chief UK Economist - - PowerPoint PPT Presentation
UK monetary policy outlook Andrew Goodwin Chief UK Economist - - PowerPoint PPT Presentation
UK monetary policy outlook Andrew Goodwin Chief UK Economist agoodwin@oxfordeconomics.com Ian McCafferty Senior Adviser 5 February 2020 Markets saw last weeks decision as a close call Questions: events@oxfordeconomics.com 2 Why do we
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Why do we not expect the MPC to cut Bank Rate?
- ‘Hard’ data for late-2019 was dampened by temporary
factors which should unwind in early-2020
- Recent ‘soft’ data has been better (though still weak in
a longer-term context)
Questions: events@oxfordeconomics.com 3
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PMI has moved out of rate cutting territory
Questions: events@oxfordeconomics.com 4
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Why do we not expect the MPC to cut Bank Rate?
- ‘Hard’ data for late-2019 was dampened by temporary
factors which should unwind in early-2020
- Recent ‘soft’ data has been better (though still weak in
a longer-term context)
- MPC’s very weak forecast sets a high bar to a rate cut
Questions: events@oxfordeconomics.com 5
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The MPC has become very gloomy about growth
Questions: events@oxfordeconomics.com 6
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Why do we not expect the MPC to cut Bank Rate?
- ‘Hard’ data for late-2019 was dampened by temporary
factors which should unwind in early-2020
- Recent ‘soft’ data has been better (though still weak in
a longer-term context)
- MPC’s very weak forecast sets a high bar to a rate cut
- Risks around Brexit and global growth have eased
(though Coronavirus poses a new source of risk)
Questions: events@oxfordeconomics.com 7
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Despite repricing, we still see lower chance of a cut
Questions: events@oxfordeconomics.com 8
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Why do we not expect the MPC to cut Bank Rate?
- ‘Hard’ data for late-2019 was dampened by temporary
factors which should unwind in early-2020
- Recent ‘soft’ data has been better (though still weak in
a longer-term context)
- MPC’s very weak forecast sets a high bar to a rate cut
- Risks around Brexit and global growth have eased
(though Coronavirus poses a new source of risk)
- Monetary policy lags mean benefits of cutting rates will
not be seen until after the fiscal boost has already kicked in
Questions: events@oxfordeconomics.com 9
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What's in new BoE boss Andrew Bailey's in-tray?
- Current policy stance and forecast. Should the MPC cut
Bank Rate? Is the MPC too gloomy about potential supply and the risk of escalating domestic inflation?
- What does the BoE have in its toolkit to tackle the next
downturn?
- If such a downturn doesn’t happen, how should the BoE go
about running down its balance sheet?
- Can the MPC improve its communications? Trade-off
between innovative thinking and communicating a clear message
- Post-Brexit financial regulation – maintaining the
attractiveness of City without raising financial stability risks
Questions: events@oxfordeconomics.com 10
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