BoE: rejecting imported stimulus
- The BoE significantly upgraded its forecasts for GDP growth and excess demand as the economy was stimulated by lower interest rates despite a much better 1Q19 performance. Forecast changes are a hawkish stretch to the reaction function.- A still-gloomy short-term forecast has encouraged patience from the MPC, but I expect another upside surprise to help accelerate the next rate hike to Nov-19.
- Imported stimulus from market rate falls since Feb-19 seem to be inappropriate in the MPC’s (and my) view. Current pricing remains over 10bps beneath the old conditioning assumption and should be unwound soon.
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