Thursday Sep 21 2023 12:25
3 min
Rates held at 5.25%, bringing an end to the succession of rate hikes going back to Nov ‘21 QT of £100bn announced:
I don’t know if we categorise this as a hawkish hold – what's appears clear is that the BoE saw the CPI print coupled with soft growth figures and thought it’s enough to warrant holding fire for the time being. The vote was split 5-4, a tight call that was reflected in the market pricing ahead of the event.
If they really think that the disinflation seen in the Aug CPI is enough to declare victory then they are wrong. CPI inflation fell from 7.9% in June to 6.7% in August, which is ‘good news’ but the core stickiness is not really budging fast enough - Core goods CPI inflation fell from 6.4% in June to 5.2% in August, which the BoE notes was much weaker than expected in the August Report. Services CPI inflation rose from 7.2% in June to 7.4% in July but declined to 6.8% in August, again below the Bank’s own forecasts.
If they think they want to await more incoming data then maybe they are right. Maybe more than the CPI they are looking at the weak growth data and starting to fret they have already done too much?
As per the Fed and ECB, it’s very much less of a case of how high as how long – the decision to pause today confirms that the BoE is falling in line with peers – the emphasis now is on duration not the absolute level.
Meanwhile Turkey’s central bank raised its one-week repo rate by 500bps to 30%!! That is how to do it!
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