September MPC - Analysts react

"However, the MPC minutes significantly stepped up its "hawkish" rhetoric, stating that there is now a majority of MPC members that judge "some withdrawal of monetary stimulus was likely to be appropriate over the coming months." It is as clear a signal as the MPC can give that markets should prepare for a rate rise soon, probably in November. If they do hike in November, we think it will be a mistake as UK economic activity is clearly slowing." - Daniel Vernazza, chief UK & Senior global economist, UniCredit Bank

"Based on recent MPC statements, we shift our long-held call of no change in policy, and now expect the BoE to hike 25bp in November 2017. This change is not based on a revised macro outlook as 'no-change' remains the only policy action consistent with our growth and inflation forecast. Rather, we believe the MPC is now very clear and cohesive on the merits of less accommodation in the coming months. Even faced with disappointing data, the MPC might just have boxed itself into a corner." - Barclays Research

"The minutes of September’s MPC meeting struck a decidedly hawkish tone, with the Committee threatening a rate hike over the "coming months". We see this as an attempt to shake markets out of their complacency after the failure of previous, subtler, attempts. The MPC’s reasoning for its hawkish shift was unconvincing, with a focus on weak supply despite scant evidence of this having any impact on underlying inflationary pressures. With the outlook for growth, wages and inflation subdued, and with the Committee having failed to follow through similar threats in the past, we still think it unlikely that there will be a rate hike in the near-term." - Andrew Goodwin, Lead UK economist Oxford Economics

"The MPC has ratcheted up its hawkish rhetoric [...] A rate hike, however, is contingent on wage growth accelerating, and the Committee noted that"[...] there was not yet evidence of the sustained pickup incorporated in the August Inflation Report projection." Recent data, the Committee said, had pointed to "a slightly stronger picture than anticipated" for Q3 GDP growth, but it now remains to be seen whether the economy can sustain its limited momentum in the face of the threat of imminent rate rises. On balance, we continue to think that GDP growth and domestically-generated inflation will be too weak for the MPC to raise rates over the next year, but its clear now that it would not take much of an improvement in either to spark the MPC into action." - Samuel Tombs, Chief UK economist, Pantheon Macroeconomics

"We now think a BoE hike in November is a close call but given that one condition is 'a gradual rise in underlying inflationary pressure', which we interpret as higher wage growth, we still think BoE will stay on hold this year. Our base case is now a hike in Q1 18, as BoE is less worried about political uncertainty and more focused on economic data. Markets pricing seems fair, as a November BoE hike is priced in by approximately 60% and a full hike is priced in by February." - Danske Bank

"But the committee pointed out that BoE estimates suggested that compositional effects may have depressed the wage data by some 0.7%. In other words, the mix of employment has shifted towards low paying jobs and adjusting for this, pay growth is closer to 3%. In short, the MPC is genuinely concerned over weak productivity growth constraining the economy’s supply capacity and that even slow demand growth will result in mounting domestically generated inflation pressures. [...] We are less concerned over medium-term inflation developments than the MPC. We view domestic price pressures as remaining muted over the next couple of years and judge that inflation will decline noticeably over the next 12-18 months as the effects of the fall in the pound on inflation begin to fade." - Philip Shaw, Investec