Need To Know News

BoE August minutes reveled another split 1-7-1 vote, with Besley arguing for a hike and ultra-dove Blanchflower yet again favouring a rate cut, as expected. Both a rate hike and a cut were discussed. Compared to the July minutes, the committee now viewed upside risk to inflation to have eased, due to lower oil prices. This is in line with the August Monetary Policy Report, which opened the door to the possibility of a rate cut once there is real signs of inflation abating. Gilt futures initially dipped sharply on the release but quickly recovered and are now back to pre-release levels.

Minutes to the Bank of England’s rate-setting meeting earlier this month, when rates were held at 5%, are expected to show a three way split of 1-7-1

Experts say the minutes may show seven members of the Monetary Policy Committee voted to hold rates unchanged, one voted for a 25bp rise and one for a 25bp cut. If that proves to be the case the voting will be identical to the previous meeting.

The BOE’s August Inflation Report shows the Bank expects CPI inflation to spike to around 5% this year but to then drop to just below the 2% target in two years’ time, based on market expectations that interest rates will remain roughly constant at 5%.

Need to Know News’ Scream Audio will broadcast the minutes live from the BoE at 9.30am London time.

We expect the August BoE Minutes to show yet another split 1-7-1 vote, with Besley arguing for a hike. Although yesterday, Besley stated in a newspaper interview that “All being well, inflation will fall again next year and will be much closer to the two percent target by the end of 2009″, which could suggest that he voted with the majority in favour of a steady rate. Meanwhile, ultra-dove Blanchflower should continued to have favoured a rate cut. The August Inflation Report was less hawkish than market players had expected and there is likely to be MPC members not agreeing with the Report’s inflation outlook, which included CPI below target in 2 years time as its main scenario.

European Fixed Income Outlook: European debt futures are likely to open with a negative bias, in line with overnight Treasuries, continuing the downward correction started yesterday afternoon. The local calendar has a U.K. focus with the August 6-7 BoE Minutes on top of the agenda. We expect the August minutes to show yet another split 1-7-1 vote, with Besley arguing for a hike (although yesterday’s comments from Besley could indicate a steady hand vote), while ultra-dove Blanchflower should continue to favour a rate cut. We expect the minutes to underpin an outlook for steady rates ahead, with fears of dislodging inflation expectation deterring the MPC from cutting rates. On the U.K. data slate, July public sector finances, M4 money growth and August CBI manufacturing orders.

Minutes to the Bank of England’s rate-setting meeting earlier this month, when rates were held at 5%, are expected to show a three way split of 1-7-1

Experts say the minutes may show seven members of the Monetary Policy Committee voted to hold rates unchanged, one voted for a 25bp rise and one for a 25bp cut. If that proves to be the case the voting will be identical to the previous meeting.

The BOE’s August Inflation Report shows the Bank expects CPI inflation to spike to around 5% this year but to then drop to just below the 2% target in two years’ time, based on market expectations that interest rates will remain roughly constant at 5%.

Need to Know News’ Scream Audio will broadcast the minutes live from the BoE at 9.30am London time.