While far less exciting than today’s Turkish rate announcement which saw the central bank hike the 1 week repo rate by 625bps to 24%, the BOE decided to keep rates unchanged at 0.75% as expected in a unanimous 9-0 vote.

In a relatively upbeat statement, the BOE said that economic activity had been better than expected, and raised its Q3 GDP estimate to 0.5% from the August estimate of 0.4% noting the very limited degree of slack remaining in the economy, and predicting that a small margin of excess demand was projected to emerge by late 2019 and build thereafter, feeding through into higher growth in domestic costs than has been seen over recent years.

As also expected, the BOE repeated its view that any future rate hikes “are likely to be at a gradual and limited” over the next few years as inflation to its 2% target. The central bank also discussed the global economy, noting that it “still appears to be growing at above-trend rates, although recent developments are likely to have increased downside risks around global growth to some degree. “

In emerging market economies, indicators of growth have continued to soften and financial conditions have tightened further, in some cases markedly.  Recent announcements of further protectionist measures by the United States and China, if implemented, could have a somewhat more negative impact on global growth than was anticipated at the time of the August Report.

In the minutes accompanying the decision, the MPC said it saw more indications of uncertainty over Brexit withdrawal process than a month ago, especially financial markets.

The central bank also noted that ongoing tightening of monetary policy is likely appropriate if economy grows as expected, and that any rate rises are to be gradual and limited.

It noted that recent developments have increased downward risks to above trend global economic growth, especially for EMs.

The central bank highlighted recent protectionist measures by the US and China and said these could have a somewhat more negative effect on growth than expected in August, if implemented Sees Q3 growth of 0.5% QQ (prev. 0.4%)

The market is pricing in the next rate hike for May.

In response to the widely expected announcement, cable has done nothing and was virtually unchanged.

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