BoE Preview: MPC will vote to cut Bank Rate by 25bps – RBC CM

Research Team at RBC, expects that the UK MPC will vote to cut Bank Rate by 25bps to 0.25% and increase the QE target by £50bn by renewing its programme of Gilt purchases over a four-month period.

Key Quotes

“It won’t be a straightforward decision for the MPC, though, as they consider a ‘package of measures’ being cognisant of the costs as well as the benefits associated with each of these policies. Having looked at the alternative of concentrating stimulus in ‘credit easing’ policies, we think it is more likely that the MPC conclude it will be even more difficult to achieve a meaningful impact there.

Instead, we think the Committee will seek Financial Policy Committee input on potential measures to ameliorate the adverse side effects of a rate cut and more QE Gilt purchases. On the basis of post-referendum comments, we would expect Kristin Forbes to dissent from voting for more stimulus this time, but we look for the other eight Committee members to back an early loosening in monetary policy.”