Bank of England kept their nerves under control – Rabobank

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Bank-Of-England

Elwin de Groot, strategist at Rabobank euro zone, states that the “pound the catch loosens as BOE operators off guard political inaction,” says one of the owners of Bloomberg yesterday.

key Quotes

“In fact, it was the second time in the space of three weeks the financial markets in the UK were wrong. This time it was the governor of the Bank of England Carney, who surprised markets with withdrawal of a rate cut as well as any other monetary easing measures. the MPC voted 8-1, with the only Vlieghe argue for an immediate reduction in the base rate. as a result of the British pound soared by more than 2.5% against the dollar in the immediate aftermath of the decision period, although it fell more than the gain in the afternoon.

The minutes indicate that most members “of the monetary policy committee expect to be loosened in August.” While some may argue that yesterday’s decision was simply a stay of execution with respect to a cut in the rate base, the minutes also noted that “the committee discussed several options for flexibility and combinations thereof. The exact scope of further stimulus measures will be based on updated forecast of the commission, and its composition will take into account interactions with the financial system. “

In other words, the MPC wants a clearer picture of the impact of Brexit (which, hopefully, comes with the data in the coming weeks and the inflation report August 4). But it also suggests that the MPC is open to alternative measures. As we argued in our preview, these measures are more likely to be targeted (trying to stimulate lending without weakening sterling further) instead of using a blunt object, and potentially distort, cut in the base rate. That said, the latter will obviously remain an option if the economy turns out to be even weaker price and cost-push pressures, fueled by a weaker pound, do not materialize “.

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