07 Nov 2019
Bank of England preview
Recent Bank of England meetings have been decidedly uneventful.
With events in the UK overshadowed by Brexit, and the BoE itself suggesting they will not take any policy action until the future of the UK has been decided.
Today’s meeting is unlikely to be any different, however it is worth keeping an eye on for two reasons. Firstly, market expectations of a Bank of England rate cut in the next 12 months have come right in, from a 25 bp cut within 12 months being almost fully priced in a month ago to almost no expectation of a cut within the next 12 months currently. On the other hand, some Bank of England members have recently started to suggest that a cut would be more likely than a hike, a departure from the party line of most of the summer, which was that a hike and a cut were equally likely. Any development of this view will help colour the markets longer term expectations. Our base case remains that the BoE will maintain rates at present levels until the end of the proposed negotiation period at the end of 2020.
Secondly, today see’s the launch of the newly revamped “Monetary Policy report” (formerly the Inflation report). The report is expected to focus more on economic outlook and “topical issues”, and less on reviewing recent data. The BoE will be particularly keen to avoid being accused of bias with a general election campaign underway, so Brexit discussion will likely be kept to a minimum, although we expect Carney to face questions on Brexit, the recent extension, his potential successor and the general election in the press conference at 12.30.
US-China trade talks delay
Reports yesterday, pointed to the possibility that a meeting between President Donald Trump and Chinese President Xi Jinping, which was seen as paving the way for the signing of an interim trade deal, could now be delayed until December. Somewhat disconcertingly there seems to have been more focus on where to hold the meeting than on the detail of the talks/deal themselves, with London said to be the latest venue under consideration. The talk is that leaders could meet after a NATO Summit scheduled for 3-4 December.
China has been pushing for more tariffs to be removed as part of any upcoming deal, with Beijing seemingly looking for the US to drop 15% tariffs on about $125bn of Chinese goods which took effect from 1 September whilst they are also said to be seeking relief from earlier 25% tariffs on about $250bn of imports from machinery and semiconductors to furniture. Risk sentiment has not moved sharply one way or another in recent days, awaiting a bigger directional steer such as from trade news. The talk of a delay in setting the big meeting has done little to shake sentiment markedly either.
10.00 EC EC economic forecasts
12.00 UK BoE announcement
12.30 UK BoE press conference