BoE: Carney’s parting policy mistake?
- The MPC seems to have lost confidence in its forecast and become myopic, which increases the weight on recent data weakness. However, those data have not disappointed significantly overall, while the surging PMI supports the bullish story.- Excesses should be only marginally reduced and remain consistent with hikes, not cuts. I expect the MPC to keep policy on hold, albeit with three dovish dissents.
- So-called risk management is compounding the MPC’s apparent change in reaction function, but I see it as a chimera. Policy has state-dependent effects, but a cut now would be the antithesis of an optimally timed intervention, in my view.
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