BoE: MPC to respond with easing priced - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that a monetary policy decision that is less finely balanced than the RBA’s is the BoE’s decision on Thursday.

Key Quotes

“We expect the MPC to cut Bank Rate by 25bps to 0.25% and to perhaps make adjustments to the Funding for Lending scheme to further entice banks into extending loans into the real economy.

Action by the BoE is fully anticipated by the market with the overnight swaps rate pointing to a cut of over 30bps being priced. Therefore there is certainly a danger that the pound does not weaken in the aftermath of a 25bp cut. The weekly IMM data reinforces that possibility with our measure of speculative positioning showing the largest GBP short position on record.  More aggressive action than simply a cut and some changes to Funding for Lending will probably be required in order to weaken GBP/USD, especially given the worsening of USD sentiment in the aftermath of the disappointing GDP report.”