Early 2020 BoE rate cut looking more likely - ABN AMRO

Commenting on the Bank of England's monetary policy announcements, "The Bank of England kept monetary policy on hold today, though in a surprise move two members of the MPC dissented in favour of a 25bp cut," said ABN AMRO senior economic Bill Diviney.

Key quotes

"The broader MPC were of the view that the current policy stance was appropriate, given that (among other reasons) unit labour costs are “growing at rates above those consistent with meeting the inflation target in the medium term.” However, Michael Saunders and Jonathan Haskel pointed to falling job vacancies and temporary employment as signs that the labour market is turning, and that Brexit uncertainties were likely to persist for longer."

"The MPC meanwhile added the key line to its statement that “if global growth fails to stabilise or if Brexit uncertainties remain entrenched, monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation.” In its quarterly Monetary Policy Report meanwhile, the BoE upgraded its growth forecasts for 2019-2020 (by 0.3pp and 0.1pp respectively), while lowering its forecast for 2021 by 0.4pp."

"The change for 2021 appears to be based on a shift in conditioning assumptions for Brexit, from a ‘smooth’ transition to new trading arrangements (i.e. a gradual shift over a number of years) to an ‘orderly’ transition, consistent with the current government’s objective to leave the customs union at the end of 2020, with the additional friction in goods trade at the border that this implies. All told, the MPC is demonstrating a clear easing bias, and given the downside risks to growth, looks increasingly minded to ease policy early next year."