Deutsche Bank analysts point out that the BoE kept rates unchanged yesterday but the bigger takeaway was the dovish message.
“It started with the 2 dissenters who voted for a cut, indicating that they thought that some monetary stimulus was required to ensure inflation returned to target. The meeting also included three key changes to the BoE outlook according to our economists. The first was as expected, that was the MPC revising down its near term growth and inflation outlook. The second was the MPC revising down its estimate of potential supply and the third the BoE’s condition assumptions on Brexit changing materially. The end result is that our economists continue to see January as a live meeting for a rate cut with the election outcome and upcoming growth and labour market data releases taking on added significance. Indeed, with Saunders and Haskell dissenting, the bar to a cut has been lowered. Sterling weakened through the meeting and closed down -0.30%.”
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