BOE And Governor Carney Sounded More Dovish Than Hawkish But Markets Hear What They Want to Hear
Skerdian Meta • 2 min read
The Bank of England kept interest rates unchanged with all MPC members voting to keep them unchanged. That means no rate hikes for some time because it takes time for the MPC members to change their minds, enough to make the votes for another rate hike. In fact, the monetary policy summary and the press conference from Governor Carney sounded pretty dovish, a lot more than they sounded hawkish, yet, the GBP has climbed around 140 pips form the lows today. Let me list the main comments below:
- 2019 GDP forecast revised lower at 1.2% against 1.7% previously. 2020 GDP forecast is revised at 1.5% against 1.7% previously
- The BOE acknowledges the damage on GDP growth from Brexit. Productivity growth is also expected to be weaker than previously estimated.
- Brexit uncertainties have led to volatile economic data from Britain and if uncertainties continue, they could lead to greater volatility.
- UK economy as a whole is not prepared for a no-deal Brexit case.
- The consumer demand and the housing market has been hit by Brexit uncertainty.
- The BOE expects the CPI (core price index) inflation to decline below the 2% minimum target in coming months
- The fundamentals for the UK economy are solid, the labour market is tight. If there is clarity on the Brexit deal soon, the UK economy should see some upside since it has the potential.