The Bank of England will for the first time release a slew of key reports alongside its monthly monetary policy decision on Thursday, meaning investors and the public will have to contend with a flood of information usually released separately.
At 1100 GMT on Aug. 6, the BoE will simultaneously publish its monthly decision oninterest rates, the breakdown of how its policymakers voted along with a summary of their debate, and its quarterly forecasts for Britain's economy, including inflation. Governor Mark Carney will then hold a news conference at 1145 GMT. Below is a summary of what are likely to be the main points of what some economists have dubbed the BoE's “Super Thursday”.
INTEREST RATES – Britain's economy is finally growing strongly. But with inflation still at zero and expected to return to the Bank's 2 percent target over roughly two years, the BoE is expected to keep interest rates at their record low of 0.5 percent. Governor Mark Carney has said a decision on raising rates is likely to come into focus around the turn of the year. Most economists expect a rate hike in February.
VOTE COUNT – While the Monetary Policy Committee is expected to keep rates on hold, it could split for the first time this year. Many economists predict two, possibly three, dissenting votes on the nine-member MPC. Ian McCafferty and Martin Weale voted to raise rates between August and December last year, before the plunge in oil prices raised fears of a damaging bout of deflation. Fellow MPC member Kristin Forbes has also suggested that she might call for a rate hike soon. David Miles could mark his last MPC meeting by dissenting. But he is due to be replaced in September by a hedge fund economist, Gertjan Vlieghe, whose past academic research prompted some economists to say that he is likely to want to keep rates low for a while longer.
INFLATION FORECASTS – In May, the Bank said inflation was likely to hit its 2 percent target in two years' time. But since then, the pound has risen, which will push down import prices. A renewed fall in oil prices and expectations in markets that the BoE will raise rates sooner than it had envisaged in May could also slow the rise in British inflation. On the other hand, workers' pay is growing more quickly than the Bank forecast in May. Private-sector economists are split on whether the BoE will lower its medium-term inflation forecasts, something which, on its own, would be taken by investors as a sign that there is less urgency to start raising rates.
WAGES AND PRODUCTIVITY – Another part of the puzzle for the BoE is whether the recent pick-up in pay is being offset by an improvement in Britain's poor productivity. Carney said on July 16 it was too soon to be sure that the hourly output of workers had increased enough to slow the impact that rising wages will have on inflation. If the BoE suggests productivity is picking up more strongly, it could temper expectations about an early rate hike and the pace of further increases in borrowing costs.
CARNEY'S COMMENTARY – The governor and other Bank officials will hold a one-hour news conference starting 45 minutes after the combined announcements. That will give Carney the chance to see how markets have reacted and address any interpretation by investors that he does not agree with. In an opening statement, before he takes questions from reporters, Carney may stress one aspect or another of the outlook for the Bank's rate-setters.
