Bank of England meeting on Thursday

All eyes are on the next Bank of England (BoE) Monetary Policy Committee (MPC) meeting on 3rd of November. In August, MPC opted for a package of measures in an effort to boost growth and provide extra support in meeting the 2% inflation target. The stimulus included a cut of 25 basis point, bringing the Bank Rate to 0.25%. It also comprised of a £10 billion of UK corporate bonds purchase and an expansion of the UK government bonds purchase scheme of £60 billion, all financed by the issuance of central bank reserves.

The meeting will also coincide with the release of the Quarterly Inflation Report and the associated press conference. This  will come just days after Mark Carney announced he would be stepping down from his post in 2019, before the maximum 8 years of his appointment would be up.

Prior to the UK GDP figures announcement last week, some analysts have already noted that expectations of a November rate hike have decreased; the probability of taking Bank Rate to 0.1%, was priced at around 30% compared to 40% a week ago and 70% in mid-August.

According to Kristin Forbes, the most hawkish member of the central bank’s interest rate-setting committee the rate cut to 0.25% is sufficient to prevent any economic recession.

 “The economy is experiencing some chop, but no tsunami,” she said, adding: “The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction.”

During their latest meeting earlier this month, MPC communicated another potential rate cut before the end of the year. However in light of the strong GDP figures, the BoE might delay any more stimulus. There was an increase of 0.5% in the quarter to the end of September, despite all the warnings over the Brexit uncertainty.  The economy's resilience was down to a strong consumer spending and services sector, therefore analysts now suggest that BoE policymakers will not cut rates below their current record lows.

That was down on the second quarter's 0.7 per cent growth but better than analysts' predictions - the most optimistic of which was for 0.4 per cent growth, while most had pencilled in 0.3 per cent.

The Office for National Statistics said that the robust growth of 0.5%, defying already revised expectations of 3% is a positive evidence of no 'pronounced' impact on the economy in light of of the referendum result.

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Reuters: Business News