How dovish is the MPC? – Rabobank

FXStreet (Guatemala) – Analyst at Rabobank explained that the minutes of the April MPC meeting made clear that despite the current absence of inflationary pressures there is very little risk of another rate cut during the current cycle.

Key Quotes:

“The minutes included the phrases that “two members regarded this month’s decision as finely balanced” and “all members agreed that it was more likely than not that Bank Rate would rise over the three-year forecast period.” These statements were repeated in the May minutes.

“In the presentation of the May Inflation Governor Carney who made clear that “the MPC expects the impact of past falls in commodity prices to be relatively short lived and will therefore look through them in setting policy”. While Carney’s constructive outlook on the UK economy were summarised in his view that “the economy is growing, unemployment is falling, earnings growth is improving and there is no evidence of household spending being delayed”, the Bank is aware of downside risks in particular the weakness of domestic cost pressures.”

“Sterling strength and fiscal austerity were cited as headwinds by Carney in the Inflation Report press conference. The fact that the Governor has urged the government to act with “appropriate speed” in holding the planned referendum on the UK’s position with the EU also suggests he is wary about the impact of political uncertainty on the UK economy. The Bank revised down its UK growth forecasts in the May Inflation Report. “

Analyst at Rabobank explained that the minutes of the April MPC meeting made clear that despite the current absence of inflationary pressures there is very little risk of another rate cut during the current cycle.

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