While we wait for the new era of BoE communications to begin later this year, meetings such as those tomorrow that have almost no chance of any policy change will continue to be dull affairs for those who are looking for the latest insight into the minds of the MPC. No policy change, no statement.
So in the absence of MPC communications, what have we learnt over the past month?
- Inflation broadly developing as expected, with core stable at 1.4%
- Labour market continuing to improve, with unemployment at cyclical low of 5.7% and wage growth back to the top of the range of recent years (albeit still weak)
- Q4 GDP unchanged at 0.5%, but the mix a bit disappointing, with business investment acting as a drag on final domestic demand
- Business surveys suggesting growth momentum will be carried forward into Q1
- A mixed bag on financial conditions, with sterling up around 2.5%, equities up a similar amount, long rates up about 40bp and oil (in sterling terms) little changed.
In terms of BoE comms, my previous post highlighted three:
Forbes: “We shouldn’t let the headline inflation figure detract from the underlying strong fundamentals in the economy. That means we will need to start to think about normalizing interest rates. We don’t know when yet, and when will depend on the data, it will depend on what happens with wages.”
Weale: “Our recent forecast showed inflation rising above target by mid-2017. We expect that, in order to manage this, bank rate will rise gradually.”
Cunliffe: “The economy has been growing strongly and our forecast is for that to continue.”
My central view is that the BoE will start the normalisation process this year, with a first hike most likely in November.
Fundamental Macro 