The following are brief expectations for the BoE November 2nd policy statement as compiled from the related notes of 10 sell-side strategy and research desks.
Overall, the consensus expects the BoE to raise rates by 25bps from 0.25% to 0.50%. On GBP front, the focus will be on the MPC vote outcome to indicate if this month's hike would be the start of a gradual tightening cycle or a one-and-done deal. As such, the immediate balance of risk for GBP into the meeting seems to be binary against a 6-3 vote in favor of a hike.
BofAML Research: Given strongly worded guidance from rate setters, we expect the BoE to vote 6-3 in favor of a hike on Thursday. There is still some chance of no hike, but the big question now is what comes next. In our view, supply pessimism will be the story that lets rate hikes go with weak growth and above target inflation forecasts,making a 'limited and gradual' hiking cycle the mantra. We see risks of a more hawkish message as market pricing of one hike a year seems inconsistent with the BoE's urgency. For our part, we think this will be 'one-and-done' from the BoE even if they do not describe it that way.
TD Research: We expect the Bank of England to hike Bank Rate by 25bps tomorrow; this will be the MPC’s first rate hike in over 10 years. The vote is likely to be 7-2 in favour of a hike (with Ramsden dissenting, alongside one of Cunliffe or Tenreyro), though we see risks of an 8-1 or 6-3 outcome. Recent gains leave GBP vulnerable to a pullback unless the MPC sends further hawkish signals through the vote or guidance on future rate path. Our base case suggests a “sell-the-fact” reaction is likely for sterling, but a surprisingly hawkish outcome would extend its rally until focus turns to the next round of Brexit negotiations (9 Nov).
ING Research: With a BoE rate hike on Thursday all but priced in , what matters is the type of tightening cycle the Bank signals. "Markets have got a bit of cold feet in recent weeks, so the follow through of a 25bp rate hike should be mildly GBP supportive. But what could really drive GBP higher is if the Bank signals that this is more than just a 'one-and-done' move and instead the start of a gradual tightening cycle…We’re still positive GBP.
Deutsche Bank Research: The BoE is likely to strike a hawkish tone while hiking tomorrow but may struggle to reprice expectations much more for next year given uncertainty about Brexit. Nevertheless, we remain tactically bullish GBP based on rate differentials, lighter positioning and progress on Brexit negotiations into year-end.
Barclays Research: We expect a 7-2 vote in favour of a hike this week, with Ramsden highly likely to dissent. However, it is less clear cut between Cunliffe and Tenreyro and we feel that they both have a 50:50 chance of dissenting. Despite the doubts raised over timing of the first hike, Cunliffe may follow the majority, while data dependent Silvana Tenreyro, may choose to sit on the side lines for now. Looking beyond the November meeting, if data disappoint, the voice of Ramsden, and the doubts of other members are likely to start resonating much more and challenge the current view of the majority and the mini-cycle, in our view.
UOB Research: We are looking for a 6-3 vote in favour for a hike, with Jon Cunliffe, Dave Ramsden and Silvana Tenreyo as the dissenters. Consensus forecasts are also for a 6-3 vote in favour for a hike. Hence, a 5-4 vote would be deemed as more dovish and could send the GBP lower to retest the 1.30-level, whilst a 7-2 vote could trigger a fresh rally, driving GBP back above 1.34.
ANZ Research: Despite mixed signals on growth, the BoE has indicated that an estimated closure of the output gap means it is ready to adjust interest rates higher. This could be as early as this month’s MPC meeting, but we anticipate that any adjustment rate settings will be shallow and aimed at reversing August 2016’s precautionary monetary stimulus. The BoE may be trying to counterbalance any renewed GBP depreciation and the negative impact that that could have on fragile domestic demand.
Credit Agricole Research: In line with market expectations we expect the central bank to tighten monetary policy by 25bp. More importantly, we do not exclude that the central bank will leave all options regarding additional hikes if needed open. This stands against the notion that the central bank will deliver a dovish hike.
NAB Research: GBP will rise in response, but by how much and for how long will depend on the accompanying message and path of implied rates from here. Markets are currently pricing a full 25bps by end December 2018, but that can change depending on the upcoming guidance – a tricky issue given the spare capacity driver and the dangers that involves for consumption ahead. At any rate we see little chance of the Brexit negotiations delivering a meaningful transition/future trade outcome in the next few weeks, which leaves GBP still very vulnerable to political weakness. Fading any positive GBP response to rate increase(s) remains our base case.
SEB Research: The BOE left monetary policy unchanged at the last meeting in September. However, communication was hawkish and revealed that a majority within the MPC was prepared tog tighten policy at one of the upcoming meetings. With growth at 0.4% q/q in Q3, above the BOE forecast, and inflation above the BOE target a rate hike seems very likely at this meeting. We believe it is a one-off hike though, just to restore rates after the emergency cut in August 2016. Language may surprise on the soft side.
