BOE Could Deliver Dovish Surprise

Going into today, a lot of dovish expectations have been building up, but you know better than anyone else that the external members of the committee are the ones who tend to be more hawkish. So how likely is it that the signal signaling is going to be clear out of the NPC today? You’re absolutely right, Domano. You missed on Threadneedle St. today. Look, there are lots of clues. We’ll be watching as to when the Bank of England is going to cut rates today. But I doubt they’re going to be as forthright as the Ricksbank yesterday and tell us exactly how many cuts to expect in 2024. Maybe they tweak the guidance and say that cuts are coming in the coming months. Maybe they follow President ECB, the ECB President Christine Lagarde’s lead, and tell us which data points they’re watching as a bit of a wink, wink, nudge, nudge as to whether they’re going to cut in June or in August. You mentioned that split between the internals and the externals. Watch Dave Ramsden, the deputy governor, Does he join Swati Dhingra in voting to cut today? That could be a bit of a signal to markets. A recent speech suggests he’s had a bit of a dovish tilt, but I’m also, Joanna, going to be watching the forecasts today. If they cut the inflation forecast, it could be seen as a bit of a finger wag at the market curve on which the forecast is predicated. But the press conference today really is going to be dominated by the question of when the cuts are coming. Not just when they’re starting, but when the rest of the cuts are coming throughout the year. I doubt Andrew Bailey is going to slam the door on June, but August really going to be tricky, especially when you’ve already had the Chancellor, Jeremy Hunt, saying that cuts would be a feel good factor for voters. Yeah, yeah. Well, you know, wading into the politics there. Never, never a good idea. When you talk about the concept of central bank independence, I want to ask you a little bit more about those forecasts. Always interesting to come out of these Bank of England days when they publish them. We have a quite important GDP print coming up on Friday as well in the UK and some people are saying that that is going to show that the UK economy is actually growing faster than what analysts had penciled in. So how do you think that’s going to be factored into the forecast that we’re going to get out of the Bank of England today and how do they tie that up with dovishness? Yeah. Well, you need to compare that to the US story, where in growth has been. So and then compare it to Europe, where you’ve seen the weakness, particularly in Germany. The Governor, Andrew Bailey, has said that the UK’s inflation story is actually more like Europe’s than the US is. And that suggests that our inflation path, our interest rate path for cuts is going to be more like the Ecbs than the feds. Then you need to think about the market reaction, right, because there’s been so much speculation about weakness in European currencies and I include the pound in that opening up because of divergent between European central banks and the Federal Reserve. And that currency weakness refuelling inflation here in Europe. Well, maybe that’s a bit of a red herring, Germana, because if you look at the UK, so much of its trade is with Europe, not so much with the US So then it’s really the pound versus the euro rather than the pound versus the dollar that’s going to matter for the inflation story in the UK.