BoE: Rate hike debate amongst members – Deutsche Bank

Comments from Governor Carney at last Wednesday’s Sintra panel suggested that the debate about a rate hike before year end was ‘live’ among the dovish core of the MPC, points out the research team at Deutsche Bank.

Key Quotes

“They also shed light on the central bank’s reaction function. The Old Lady is becoming increasingly sensitive to developments in the exchange rate, and intolerant of sterling weakness. This has important implications for our bearish FX view, for while we see limited prospect of the Bank tightening aggressively enough to turn bullish, they also cap prospects of sterling underperformance.”

“In terms of FX implications, the Bank of England’s reluctance to tolerate further sterling weakness will prove an obstacle to our bearish FX forecasts. But neither is it enough to turn bullish.”