BOE preview: This meeting is expected to maintain policy interest rates unchanged
2023-10-31
■ In order to evaluate the impact of previous interest rate hikes, BOE is expected to keep the policy interest rate unchanged at its meeting on November 2nd.
■ Considering the continuous increase in wages, there may still be a possibility of further interest rate hikes in December.
On November 2nd, the Bank of England (BOE) will hold a meeting of the Monetary Policy Committee (MPC). In the previous meeting (September 21), it was decided to maintain the policy interest rate unchanged by a narrow margin of 5-4. The statement indicates that BOE wishes to evaluate the effectiveness of previous rate hikes, but also reserves the possibility of further rate hikes. If there are signs of continued inflationary pressure, further tightening may be necessary. The Consumer Price Index (CPI) in September increased by 6.7% year-on-year, the lowest level in a year and a half. In addition to the volatile food, energy, alcohol, and tobacco, the core CPI increased by 6.1% year-on-year, slowing down from its peak in May (the same as 7.1%). BOE President Bailey pointed out that the September CPI data is not far from the Bank of England's forecast.
At the same time, retail sales from July to September decreased by 0.8% year-on-year, adding to the pressure of rising living costs, setting a significant decline from December last year to February this year. Due to seasonal factors such as heavy rain in July and high temperatures in September, the future trend still needs to be closely monitored. However, personal consumption, which accounts for nearly 60% of Gross Domestic Product (GDP), is weak. The comprehensive purchasing managers' index (initial value) in October was 48.6, which has been below the good and bad line for three consecutive months. Concerns about an economic slowdown may further intensify. In order to understand the future policy direction of BOE, people will also pay attention to the actual GDP (initial value) for July to September, which will be announced on November 10th.
In the short-term financial market, the market expects BOE to maintain the policy interest rate at around 5.25% at the MPC meeting on November 2nd, which is close to 95%. However, BOE believes that due to the rise in service prices, inflation may continue in the short term, and the uncertainty of the Middle East situation may lead to the risk of energy price increases. Considering the continuous increase in wages, BOE believes that there may be a further 0.25% interest rate hike. It is expected that CPI will reach the inflation target after 2025, and even if policy interest rates remain unchanged at the final MPC meeting of the year on December 14th, BOE’s monetary tightening measures may continue in the short term.
■ Considering the continuous increase in wages, there may still be a possibility of further interest rate hikes in December.
On November 2nd, the Bank of England (BOE) will hold a meeting of the Monetary Policy Committee (MPC). In the previous meeting (September 21), it was decided to maintain the policy interest rate unchanged by a narrow margin of 5-4. The statement indicates that BOE wishes to evaluate the effectiveness of previous rate hikes, but also reserves the possibility of further rate hikes. If there are signs of continued inflationary pressure, further tightening may be necessary. The Consumer Price Index (CPI) in September increased by 6.7% year-on-year, the lowest level in a year and a half. In addition to the volatile food, energy, alcohol, and tobacco, the core CPI increased by 6.1% year-on-year, slowing down from its peak in May (the same as 7.1%). BOE President Bailey pointed out that the September CPI data is not far from the Bank of England's forecast.
At the same time, retail sales from July to September decreased by 0.8% year-on-year, adding to the pressure of rising living costs, setting a significant decline from December last year to February this year. Due to seasonal factors such as heavy rain in July and high temperatures in September, the future trend still needs to be closely monitored. However, personal consumption, which accounts for nearly 60% of Gross Domestic Product (GDP), is weak. The comprehensive purchasing managers' index (initial value) in October was 48.6, which has been below the good and bad line for three consecutive months. Concerns about an economic slowdown may further intensify. In order to understand the future policy direction of BOE, people will also pay attention to the actual GDP (initial value) for July to September, which will be announced on November 10th.
In the short-term financial market, the market expects BOE to maintain the policy interest rate at around 5.25% at the MPC meeting on November 2nd, which is close to 95%. However, BOE believes that due to the rise in service prices, inflation may continue in the short term, and the uncertainty of the Middle East situation may lead to the risk of energy price increases. Considering the continuous increase in wages, BOE believes that there may be a further 0.25% interest rate hike. It is expected that CPI will reach the inflation target after 2025, and even if policy interest rates remain unchanged at the final MPC meeting of the year on December 14th, BOE’s monetary tightening measures may continue in the short term.