UK: Trading the BoE - TDS

Research Team at TDS, expects the Bank of England to cut Bank Rate by 25bps to 0.25%, but with the August MPC meeting (and accompanying Inflation Report and press conference) just three weeks away, uncertainty over the precise timing of monetary stimulus remains particularly high.

Key Quotes

“The rate cut vote might be unanimous, but we anticipate a dissent or two by those wanting to wait to see more data, and it’s altogether possible we get a three-way split (no change / 25bps cut / 50bps cut).

Market consensus is also for a 25bps cut in Bank Rate, but note that 24 economists expect no cut, 24 economists expect a single 25bps cut, and 6 economists expect rates to be brought down close to (or exactly) 0.00%. Rates markets are pricing in a 75% chance of a 25bps rate cut. Markets are likely to take a 25bps cut (or more) as marginally dovish.

In its summary & minutes, the Bank of England is likely to elaborate on policy measures under consideration, as Governor Carney hinted at a “package” of stimulus over the Jul/Aug meetings.”