BoE on hold, waiting for the EU referendum - Lloyds

Analysts from Lloyds Bank point out that today’s meeting at the Bank of England was somewhat an exercise, as the central bank remains on hold, waiting for next week referendum.

Key Quotes:

“Today’s announcement of unchanged monetary policy, as universally expected, came alongside the MPC minutes revealing the voting record as unanimous, also in line with consensus expectations.”

“With the focus on next week’s EU referendum vote and the inherent uncertainty this brings to the economic outlook, it is apparent this week’s meeting – and the succinct write-up in the meeting minutes – was somewhat of a holding exercise. Pending the resolution of at least some of the referendum-related uncertainty on the vote itself – if not necessarily in terms of what lies beyond – the MPC did seem unlikely to take a firm view on any change in the required quantum of monetary stimulus.”

“While the Committee acknowledged some of the positive domestic data news since its May meeting – including the better tone of activity indicators for Q2 so far and signs of recovering momentum in the labour market – domestic and global uncertainties remain an overarching backdrop anxiety.”

“With the MPC’s projections in the Inflation Report for May explicitly conditioned on continued UK membership of the EU, the MPC will be awaiting the result of the referendum next week on whether they need to substantially revise their projections – including in terms of the impact of potentially sharp movements in the currency, as alluded to in the minutes.