MPC comments on economic and price prospects have been revised upwards
2023-05-16
■The Bank of England's Monetary Policy Committee meeting on the 11th decided to raise interest rates by 25bps, with the policy rate set at 4.50%
■Consider raising interest rates in June, but the direction of monetary policy will be determined based on current economic trends
On the 11th, the Bank of England (BOE) raised the policy interest rate by 25 basis points to 4.50% at the Monetary Policy Committee (MPC). Since December 2021, there have been 12 consecutive interest rate hikes, and the policy interest rate has reached its highest level since October 2008. The minutes of the meeting retained the guidance of February and March, saying that "if there is evidence that the price pressure continues further, monetary policy will need to be further tightened." Affected by the fall in energy prices and other factors, it is expected that the consumer price index (CPI) will decline to 5.1% by the end of the year, but the decline in food prices is slower than expected, and it will be revised upward from February (3.9%). Bank of China's target (2%) deviated slightly after the January-March 2025 period (1.5%).
The economic outlook of the Bank of England (BOE) has also been revised upwards, raising the real GDP for 2023 from -0.5% to+0.25% from February, and raising the real GDP for 2024 from -0.25% to+0.75%. In addition to personal consumption upgrades, it is expected that the slowdown in capital investment and housing investment will be alleviated to avoid a recession.
At a press conference after the policy decision, Bank of England Governor Bailey pointed out that "it is necessary to firmly maintain the policy stance to bring inflation back to the central bank's target level." He did not specify his next action, stating that it will depend on data, but later stated that the current interest rate hike phase is approaching its end. In the short-term money market, the expectation of the next monetary policy committee raising the policy interest rate to 4.75% on June 22nd exceeds 70%, but it will increase to 5.00% after August. Pay attention to the employment data for January to March released on the 16th and the consumer price index (CPI) of April released on the 24th to see clearly the direction of monetary policy after June.
■Consider raising interest rates in June, but the direction of monetary policy will be determined based on current economic trends
On the 11th, the Bank of England (BOE) raised the policy interest rate by 25 basis points to 4.50% at the Monetary Policy Committee (MPC). Since December 2021, there have been 12 consecutive interest rate hikes, and the policy interest rate has reached its highest level since October 2008. The minutes of the meeting retained the guidance of February and March, saying that "if there is evidence that the price pressure continues further, monetary policy will need to be further tightened." Affected by the fall in energy prices and other factors, it is expected that the consumer price index (CPI) will decline to 5.1% by the end of the year, but the decline in food prices is slower than expected, and it will be revised upward from February (3.9%). Bank of China's target (2%) deviated slightly after the January-March 2025 period (1.5%).
The economic outlook of the Bank of England (BOE) has also been revised upwards, raising the real GDP for 2023 from -0.5% to+0.25% from February, and raising the real GDP for 2024 from -0.25% to+0.75%. In addition to personal consumption upgrades, it is expected that the slowdown in capital investment and housing investment will be alleviated to avoid a recession.
At a press conference after the policy decision, Bank of England Governor Bailey pointed out that "it is necessary to firmly maintain the policy stance to bring inflation back to the central bank's target level." He did not specify his next action, stating that it will depend on data, but later stated that the current interest rate hike phase is approaching its end. In the short-term money market, the expectation of the next monetary policy committee raising the policy interest rate to 4.75% on June 22nd exceeds 70%, but it will increase to 5.00% after August. Pay attention to the employment data for January to March released on the 16th and the consumer price index (CPI) of April released on the 24th to see clearly the direction of monetary policy after June.