Research Team at Nomura, suggests that for Boe driving dovish reactions is the norm, irrespective of prevailing prices.
Key Quotes
“At noon today, the BoE will announce its latest monetary policy decision and publish both the minutes of the monthly meeting and the quarterly Inflation Report. There are then slight gaps before the press conference (12:30pm, instead of 12:45pm previously and noon originally) and economist briefing (2:30pm) begin.
An unchanged decision is unanimously expected, despite this having previously been the firm consensus date for the first hike among economists. Only Ian McCafferty is likely to vote to hike at this meeting, which would merely be maintaining a longstanding dissent. Kristin Forces and Martin Weale remain the next most hawkish members in our view, but their recent statements do not indicate imminent dissenting votes.
A more likely development would be for Ian McCafferty to drop his dissent or for Andy Haldane to strengthen his arguments for easier policy potentially being needed in future. However, we do not expect this to occur. In any case, the leaning of the core internal members is better illustrated through the inflation forecasts, so we still focus there.
News over the past few months has been similar to the shocks that drove the November Inflation Report. A disinflationary oil price shock has little effect on the 2-3yr horizon that policy influences, but the shock still affects policy.
The MPC is looking to spot price/wage inflation numbers for confirmation that the underlying pressures are becoming too strong. A longer period at low levels makes the proof more elusive, dissuading a hawkish signal.
Inflation forecasts made under Governor Carney are consistently close to 2% in 2yrs, irrespective of news or market pricing, which has moved hawkishly on only one of 10 Inflation Report days. We doubt things will be different this time.”
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