369 lines
14 KiB
Plaintext
Executable File
369 lines
14 KiB
Plaintext
Executable File
finance
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economics
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8400371
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-----
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# MPC minutes: analyst reaction
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## The Bank of England's Monetary Policy Committee maintained its 6-3 split
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in favour of keeping rates on hold at 0.5pc this month - seeing no major
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change in the medium-term outlook.
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![MPC minutes: analyst reaction][1]
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MPC minutes: analyst reaction Photo: Reuters
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10:31AM GMT 23 Mar 2011
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[Comments][2]
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### **Hetal Mehta, Daiwa Capital Markets**:
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"While the minutes struck a hawkish tone, with the MPC now seeing a
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significant risk of inflation rising above 5 percent in the coming months, the
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majority of MPC members think it right that they assess the impact of higher
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oil prices on economic growth before changing monetary policy.
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"Indeed, Charlie Bean's recent comments indicated that he will not be changing
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his vote until he has seen the preliminary GDP data for Q2, which we will get
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at the end of July, hence feeding into the August decision.
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"The minutes also stated that there was no significant shift in the balance of
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risks to the medium-term inflation forecast, indicating the Bank may be
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willing to look past this temporary upward pressure on inflation.
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"We maintain our view that the first interest rate increase will come in
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August when the economy is on a firmer footing."
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## Related Articles
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* ['Raise interest rates before it's too late'][3]
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24 Mar 2011
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* [Interest rate split: how they voted][4]
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23 Mar 2011
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* [Inflation could hit 5pc within months][5]
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23 Mar 2011
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### **Vicky Redwood, Capital Economics:**
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"The minutes of March's MPC meeting show that most committee members are still
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reluctant to start tightening policy when there is so much uncertainty about
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the growth and inflation outlook.
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"Those members wanting to keep rates on hold said that it was still not clear
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whether or not Q4's drop in GDP was just a temporary blip.
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"They also saw merit in waiting to see how the effects of the oil price rise
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played out. What's more, the meeting took place before the Japanese
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earthquake, which has clearly added even more uncertainty to the global
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outlook.
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"Admittedly, the MPC wouldn't have seen February's strong inflation figure at
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its meeting. But note that the Committee already thought that inflation might
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exceed 5 percent in the near-term. So while a near-term rate rise is certainly
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still a big risk, we remain of the view that it is not the done deal markets
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think.
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"And with the Chancellor unlikely to scale back his austerity programme in
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this afternoon's Budget, we still think the bigpicture is that rates need to,
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and will, remain very low for a long time."
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### **James Knightley, ING: **
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"The minutes to the Bank of England's March MPC meeting show no positional
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shift within the committee. The debate surrounding the decision hasn't really
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changed either.
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"Our house view is that the first hike will come in the second quarter of
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2011, most likely May, but this will be a one-of and not a series of hikes --
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we see rates ending 2011 at 1 percent."
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### **Howard Archer, IHS Global Insight:**
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"The minutes do not come across as appreciably more hawkish than in February
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with most MPC members still reluctant to hike interest rates due to concerns
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and uncertainties over the growth outlook.
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"Massive uncertainty remains over exactly when interest rates will start to
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rise. Whether or not the Bank of England hikes interest rates in the second
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quarter will depend critically on how well the economy performs over the
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coming weeks as the fiscal tightening really kicks in.
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"Indeed, more fiscal tightening will take effect in April, which is something
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that the MPC will factor in to their deliberations and could well encourage
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some committee members to vote for hold off from hiking interest rates in the
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second quarter. Wage growth, oil price developments and the impact on the
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global economy of events in Japan and Libya will also likely be important
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factors.
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"While we fully acknowledge that interest rates could very well rise in the
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second quarter, we currently hold to the view that the Bank of England will
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delay acting until August."
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### **Ross Walker, RBS Financial Markets: **
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"It's broadly as expected. We didn't expect any more dissenters this month.
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It's the same dilemma, weighing up competing risks of rising inflation versus
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still weak activity numbers."
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"For us the key issue to get some of the "No" camp to move is to see some pick
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up in the activity numbers after the weak Q4. The inflation numbers are
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sufficiently bad but if activity does not pick up they may hold off in May.
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"Our view is that there will be a quarter point rise in May and another one in
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August but that will be it for the year."
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### **Alan Clarke, BNP Paribas:**
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"Broadly as expected. I think it is a slight evolution in the hawkish
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direction, particularly the emphasis on inflation likely to be above 5 percent
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and signs of higher pay pressures and concerns that externally-generated
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inflation, especially from commodities, threatens the medium-term inflation
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outlook.
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"They are moving in a hawkish direction, but for those members reluctant to
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hike, the uncertainty that is holding them back has got even worse.
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"Until there is more clarity, I think they will be reluctant to pull the
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trigger on rate hikes. For now, the worsening in the inflation data since this
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meeting continues to favour a rate hike in May, but it is a close call.
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"The particular focus here is on consumer spending and consumer confidence, so
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Thursday's retail sales figures could be pretty important."
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### **Philip Shaw, Investec:**
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"It doesn't look as though the MPC is any closer towards deciding to push
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rates up in the near term. The committee concluded that as a result of recent
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events there was greater uncertainty with regard to the outlook for both
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inflation and output, but that the balance of risks overall was largely
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unchanged.
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"Some members of the committee also also appeared a bit more concerned over
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some of the weakness in consumer spending. Overall, we continue to think that
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rates will probably stay on hold for the next few months, and while a May hike
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is clearly possible, we still tend towards the view that the softness in high
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street activity, in particular, will encourage the MPC to maintain the curent
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stance of policy until August."
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reaction.html
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Telegraph
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## [Economics][11]
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* ### [Finance »][12]
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[![Monetary Policy Committee members: the hawks, the doves and the in-
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### [Interest rate split: how they voted][4]
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[![][22] ][23]
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