BoE: Standard Chartered: Holding rates as energy risks change
Christopher Graham of Standard Chartered anticipates a 7–2 split at the Bank of England's meeting on March 19, with two members probably supporting a 25 basis point reduction. While keeping an eye on Middle East concerns, softer UK labor data, and lessons learned from 2011 and 2022, the bank is perceived as navigating a short-term energy shock. Although the date is uncertain, more softening is anticipated.
BoE is on a steady, cautious hold.
"With seven members voting for a hold and two members (presumably Taylor and Dhingra) voting for a 25bps cut, we expect the Bank of England (BoE) to maintain rates constant at its policy meeting on March 19."
"The minutes will, however, emphasize how each member of the Monetary Policy Council (MPC) is evaluating the risks associated with the Middle East conflict."
"The doves may emphasize the downside risks to economic growth, and the hawks are likely to focus more on the upside risks to inflation, while we expect the BoE to look through a short-term oil price shock."
"At least some MPC members probably still view rates as restrictive, and we believe the case for BoE to boost rates is weaker, partly because it has lowered rates less aggressively so far in this cycle."
Additionally, from mid-2022, unemployment has been slowly rising, and wage growth has slowed since mid-2023. The UK labor market has also showed more overt symptoms of softening (the next set of data is to be issued on March 19, prior to the BoE meeting). The BoE's reaction function may be influenced by lessons learned from 2011 and 2022.
"We still see more easing from the BoE (we forecast a terminal rate of 3.00%), but the timing of those cuts are highly uncertain and under review. While a near-term end to hostilities and a reduction in energy prices could allow our current schedule of cuts (once per quarter starting in Q2) to play out, there are growing risks that a prolonged spike in energy prices could push the next cut back into H2 or 2027."
Christopher Graham of Standard Chartered anticipates a 7–2 split at the Bank of England's meeting on March 19, with two members probably supporting a 25 basis point reduction. While keeping an eye on Middle East concerns, softer UK labor data, and lessons learned from 2011 and 2022, the bank is perceived as navigating a short-term energy shock. Although the date is uncertain, more softening is anticipated.
BoE is on a steady, cautious hold.
"With seven members voting for a hold and two members (presumably Taylor and Dhingra) voting for a 25bps cut, we expect the Bank of England (BoE) to maintain rates constant at its policy meeting on March 19."
"The minutes will, however, emphasize how each member of the Monetary Policy Council (MPC) is evaluating the risks associated with the Middle East conflict."
"The doves may emphasize the downside risks to economic growth, and the hawks are likely to focus more on the upside risks to inflation, while we expect the BoE to look through a short-term oil price shock."
"At least some MPC members probably still view rates as restrictive, and we believe the case for BoE to boost rates is weaker, partly because it has lowered rates less aggressively so far in this cycle."
Additionally, from mid-2022, unemployment has been slowly rising, and wage growth has slowed since mid-2023. The UK labor market has also showed more overt symptoms of softening (the next set of data is to be issued on March 19, prior to the BoE meeting). The BoE's reaction function may be influenced by lessons learned from 2011 and 2022.
"We still see more easing from the BoE (we forecast a terminal rate of 3.00%), but the timing of those cuts are highly uncertain and under review. While a near-term end to hostilities and a reduction in energy prices could allow our current schedule of cuts (once per quarter starting in Q2) to play out, there are growing risks that a prolonged spike in energy prices could push the next cut back into H2 or 2027."
