Goldman Sachs on BOE’s dovish tilt

Goldman Sachs’ Research Team out with their afterthoughts on the dovish BOE policy announcement, highlighting that BOE’s Chief Economist Haldane’s vote displayed a dovish tilt.

Key Quotes:

“The BoE's MPC voted 6-2 to leave Bank Rate unchanged at 0.25% at its August policy meeting. In a dovish tilt relative to our expectations, Chief Economist Haldane did not join two MPC members who had voted for a rate hike at the June meeting.

The Committee announced that its Term Funding Scheme (TFS, offering cheap, 4-year funding to banks and introduced last August) will end in February 2018, as we expected.

No major changes were announced to the BoE's stock of purchased assets.

The MPC's updated macro assessment involved a modest downgrade to GDP growth, with the inflation forecast broadly unchanged from May, conditional on a somewhat steeper money market curve. Weaker GDP growth partly reflects a weaker supply-side performance (with weaker productivity growth), which translates into weaker wage growth and adds to the squeeze in households' real incomes.

As expected, there were few changes to the tone of the Monetary Policy Summary. Governor Carney sought to maintain a data dependent message on the future path of policy in his Press Conference. 

Today's BoE communication contained few surprises relative to our base case. Overall, there was a little more emphasis on impaired supply capacity than we expected. We therefore maintain our current forecast for a rise in Bank Rate in 2018Q4.“