BoE MPC to provide further detail behind decision to halt QE

By George Johns (UK Macroeconomist), Jeavon Lolay, (Senior Global Macroeconomist, Mark Miller (Global Macroeconomist), Corporate Markets

Following on from last week’s decision by the MPC to halt its programme of quantitative easing, attention will shift to the detail of its quarterly Inflation Report (published on Wednesday), which would have been a key input into the MPC’s deliberations.

Key themes arising from the statement accompanying the policy decision announcement was that the Committee thought recent monetary policy initiatives would continue to “impart a substantial monetary stimulus” to the economy, although it acknowledged that should the recovery falter, it could restart the programme of asset purchases.

We expect the detail of the Inflation Report to strike the same tone and show that the MPC is very much in “wait and see” mode. On dataflow, the BRC retail report is released on Tuesday.

The January CBI retail report was downbeat, with the VAT rise and inclement weather negatively impacting activity. Our forecast for a two percentage point fall in the annual rate of BRC total sales growth (to 4%) is also a reflection of these factors.

We expect the headline trade balance (also Tuesday) to be unchanged at £6.7bn, while industrial production data (Wednesday) are expected to post a 0.3% decline in December.

That would be consistent with the sectoral output data within the ONS’s preliminary GDP estimate released last month, which showed that the industrial sector grew 0.1% over Q4.

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* All charts are sourced to Lloyds TSB Corporate Markets Economic Research, Bloomberg, IMF and Datastream

 


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