Economics Weekly by Lloyds TSB

In the UK, the focus will be September’s Bank of England MPC minutes. In terms of the vote, we expect to see a repeat of the last three outcomes with Andrew Sentance advocating a 25bp hike in Bank Rate, but finding no support from other Committee members. Indeed, given the marked deterioration in recent UK Ship ahoy! Markets eye QE2 on both sides of the Atlantic…

In the UK, the focus will be September’s Bank of England MPC minutes. In terms of the vote, we expect to see a repeat of the last three outcomes with Andrew Sentance advocating a 25bp hike in Bank Rate, but finding no support from other Committee members. Indeed, given the marked deterioration in recent UK data there is a small chance that Sentance might have backed off this month. The minutes will also be scrutinised for any sign that the MPC may have moved closer to implementing further QE in an attempt to revive a recovery that is looking increasingly fragile. Recent data on retail sales, housing and the labour market have all surprised with their weakness, and forward-looking surveys are suggesting that growth over the next few quarters may even struggle to reach the fairly subdued levels projected in August’s Inflation Report. Overall, however, we would expect that it would take a further round or two of disappointing data releases for the MPC to begin seriously considering additional stimulus. Data-wise, it’s a quiet week, with the public sector finance figures being the key release.

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