Trading the BoE inflation report - TDS

Research Team at TDS, suggests that a 9-0 vote seems the safe thing to do for BoE in its forthcoming meet with the EU Referendum just 43 days away.

Key Quotes

“But two MPC members have said a deterioration in the data might push them to vote for a cut. This is highly unlikely (they’d likely reverse by late-summer), but not impossible: just last month the MPC said they’d look through any near-term weakness in the data.

Inflation Forecast: The inflation forecast will need to incorporate the move up in oil prices from the Feb IR’s $37/bbl 2016 assumption, which will boost this year’s inflation forecast. Rate expectations have fallen since Feb, so if the MPC incorporate yields below 0.50%, this should boost the Year 3 inflation forecast to a record high above 2.25%.

Growth Forecast: With 16Q2 UK growth looking stagnant and global demand somewhat softer than expected, expect a slight downgrade to 2016 growth (conditioned on a Remain win). While spare capacity is nearly worked off, the sub-trend 16Q2 will again open up excess supply.”