BoE likely to remain on  hold for the next 12 months - Danske Bank

Today the Bank of England left monetary policy unchanged and kept a neutral bias. Analysts from Danske Bank, expect the central bank to remain on hold for the next 12 months. 

Key Quotes: 

“As we expected, the Bank of England (BoE) left monetary policy unchanged at its December meeting. It kept the Bank Rate at 0.25%, while it left the targets for the stock of government bond purchases (APF) and the stock of corporate bond purchases (CBPS) at GBP435bn and GBP10bn, respectively. It made no changes to the new Term Funding Scheme (TFS).”

“The BoE maintained its neutral stance, as it can move ‘in either direction’, which was also as expected. This said, the BoE noted that the effective GBP has appreciated by around 6% since the November meeting, implying a slightly lower inflation path compared with the November Inflation Report. This also means the BoE has less reason to hike.”

“We expect the BoE to remain on hold for the next 12 months. While we think it is unlikely the BoE will tighten monetary policy in a time of elevated political uncertainty, we think we need to see slower growth and/or higher unemployment before easing becomes likely again.”

“We think the markets price the BoE too hawkishly, as they price the first full BoE hike around October 2018. More than two hikes are priced in by year-end 2019.”