UK Markets

MPC Watch

MPC Watch

No tightening until 2024, and then by unwinding QE first

Even though the Monetary Policy Committee (MPC) will probably acknowledge in the policy announcement on Thursday 24th June that activity and inflation have been stronger than it expected, we don’t think it will suggest it is any closer to tightening policy. While the markets expect that policy will be tightened in late 2022, we don’t think the MPC will get to that stage until 2024. And when it does, we suspect it will unwind some quantitative easing before raising interest rates in 2025.

17 June 2021

MPC Watch

Rate hikes still a long way off, despite stronger economy

Given the better starting point and improving economic outlook, it would be a surprise if the Monetary Policy Committee (MPC) didn’t come out with a stronger set of economic forecasts than it had in February at its next meeting on Thursday 6th May. But we think that it will use the policy statement to push back against the markets’ expectation that interest rates will rise within the next year. Instead, we think it will be 2025 before the MPC decides to raise rates.

29 April 2021

MPC Watch

Rising gilt yields won’t push Bank of England into action

Given the improving economic outlook, we doubt the Monetary Policy Committee (MPC) will respond to higher gilt yields by stepping up the pace of its QE purchases at its next meeting on Thursday 18th March. But we think that it will use the policy statement to reiterate its forward guidance that it will keep interest rates unchanged for many years.

11 March 2021
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MPC Watch

Third lockdown unlikely to prompt more QE or negative rates

The prospect of a rapid recovery in GDP in the second half of the year and a rebound in inflation to 2% suggests that the third COVID-19 lockdown won’t prompt the Monetary Policy Committee to launch a fourth increase in quantitative easing at its meeting on Thursday 4th February. And although the MPC will probably confirm that it is moving closer to being able to use negative interest rates, we think it will disappoint the markets by not implementing them either this year or next.

MPC Watch

No further stimulus, unless there is a no deal Brexit

The next Monetary Policy Committee (MPC) meeting on Thursday 17th December should be less eventful than the last one. Indeed, if our more optimistic economic forecasts are even close to being right, then the MPC may find itself twiddling its thumbs for the next few years! But the risk of a no deal Brexit means the MPC can’t relax just yet.

MPC Watch

MPC to expand QE in response to second wave of the virus

Back in June, we were pretty much alone in forecasting that the MPC would expand quantitative easing (QE) by £100bn at its meeting on 5th November. That call looks on track, and most other forecasters have now come round to our view. But we think that the consensus is still underestimating how much more QE the MPC will announce in 2021. We expect the Bank to expand QE by a further £150bn by the end of 2021.

MPC Watch

MPC may hint more support will be needed

We expect the Monetary Policy Committee (MPC) to vote unanimously to keep interest rates on hold at +0.10% on Thursday 6th August and to continue with, but not extend, quantitative easing (QE). But the Committee may also send a signal that more monetary policy stimulus will be needed at some point. It could also revise down its estimate of the effective lower bound from +0.10% to a little below zero, leaving the door open to negative rates.

MPC Watch

MPC to keep the printing press fired up all year

The Bank of England has much more work to do. It will probably start by announcing £100bn more quantitative easing at the meeting on Thursday 18th June, and we expect additional expansions in QE over the next year. In the end, the Bank will probably end up loosening policy by much more than the market currently expects.

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