Neutral, with a dash of optimism under the hood

At the last Bank of England meeting the Monetary Policy Committee (MPC) voted unanimously to keep interest rates at 0.10% and bond purchases unchanged at £20 billion per month. There had been thoughts that perhaps the BoE would be more positive as the UK's vaccination program is coming along well. Over half of the UK adult population has now received at least one dose. Furthermore, the latest US phase III AstraZeneca trial shows that the vaccine has a 100% efficacy in preventing severe disease.

Hopeful signs seen across the world by the Bank of England

- Global GDP growth stronger than expected

  • US fiscal stimulus package should provide further global support. The BoE report had considered only around a $1 trillion package according to their minutes. See here at the top of page 5 (confusingly labelled page 2, but is actually page 5 of the PDF). So, this much larger than expected package was expected to boost the UK's economy as well as the globe.
  • Longer term yields have been rising across the world reflecting the above.
  • There was also a note about the cost of shipping containers rising, but that prices had somewhat stabilised recently.

Hopeful signs seen within the UK

- The UK GDP which fell by 2.9% was less weak than expecte, but GDO Is still around 10% below its 2019 Q4 level

  • 2021 Q2 could see 'slightly stronger' consumption growth, but unsure if this will impact the medium term forecast. (so this is being downplayed)
  • CPI expected to turn to around 2% in the Spring as the impact of lower oil prices fall away
  • Non essential retail and outdoor hospitality to open no earlier than April 12 and entertainment and non-self contained accommodation no earlier than May 17
  • Bank of England Ipsos Mori survey saw that 15% of households would be spending more after restrictions eased and 40% said they would spend less.
  • UK redundancy numbers as measure by HR1 notifications continued to be relatively muted through the first quarter.
  • UK trade in goods volumes have fallen substantially in January. Exports and imports fell around 19% and 21% respectively. (Some disruption around the UK-EU transition period end were cited)

You can read the full statement here -