– We expect the Bank of England (BoE) to remain on hold at Thursday’s Monetary Policy Committee (MPC) meeting (13:00 CET).
– Since the February minutes revealed three members voting for an additional GBP25bn of asset purchases, speculations have surfaced about the majority of the MPC shifting towards restarting the QE programme at this meeting. Comments on a Bank Rate cut have also sparked a debate about the effectiveness of e.g. negative rates.
– While acknowledging the existence of the case for more QE with the data coming out of the UK and euro zone underlining a struggle in the recovery, we do not see the majority of the MPC shifting at this meeting. Nor do we think a Bank Rate cut is the most likely policy change and we think the risks with the current aggressive pricing of the SONIA curve are skewed for the curve to steepen.
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Danske Bank