BOE: Expect a dovish meeting with a 25bp cut – Deutsche Bank
The Deutsche Bank Economists offer their insights on what to expect from the Bank of England (BOE) base rate decision due later on Thursday at 1200 GMT.
Moving on, and next up in the central bank queue today is the BoE, in what should hopefully be a more interesting decision and is also Governor Carney’s last MPC meeting at the helm. The market is pricing in a 46% chance of a cut, though at one stage earlier this month we were pricing in just over a 70% chance before last week’s better than expected PMIs.
Our economists expect a dovish meeting today with a 25bp cut, and believe that the case for a cut is strong. For one, there are clear signs of excess capacity in the economy.
UK growth has been below potential for nearly two years and recent survey data continue to point to weaker growth. Importantly, inflation remains below the Bank's 2% mandate (CPI came in at a 3-year low of 1.3% in December), with core CPI and services inflation relatively weak in spite of elevated unit labor costs. In addition, Brexit uncertainty is here to stay.”