BOE announces its latest monetary policy decision - 7 February 2019
- Prior decision 0.75%
- Official bank rate votes 0-0-9 vs 0-0-9 expected
- Asset purchase target £435 billion
- Corporate bond target £10 billion
Details of the decision and the central bank's quarterly inflation report:
- 2019 GDP forecast of 1.2% (previously 1.7%)
- 2020 GDP forecast of 1.5% (previously 1.7%)
- Says that CPI to temporarily fall below 2% target in coming months
- Cuts estimate for supply growth to 'a little below 1.5%'
- Inflation in one year's time at 2.35% (previously 2.10%)
- Inflation in two year's time at 2.07% (previously 2.12%)
- Inflation in three year's time at 2.11% (previously 2.03%)
- On growth forecast cuts, BOE says that Brexit damage has increased
- Sees weaker productivity growth than previously anticipated
- Brexit means volatility in data, Q1 GDP to rise 0.2%
- Uncertainties could lead to greater volatility in UK data
- Forecasts continue to assume a smooth adjustment to average of a range of possible Brexit outcomes
A more dovish take by the BOE as expected given that they are slashing the growth and inflation forecasts. The main takeaway though is that they continue to view that if things are as expected, then "limited and gradual hikes will be needed". This is of course based on the assumption that Brexit proceeds smoothly.
However, their take on Brexit now is that the "uncertainty has intensified" and that means chances of things proceeding in a smooth manner are seen diminishing. That's enough to send the pound lower currently. Cable falls from 1.2890 levels to a low of 1.2854 before sitting close to 1.2870 at the moment.
