MPC – Stepping stone to August

There looks to be virtually no chance the MPC will move rates at the July meeting, according to an analysis by Citigroup analysts. But, the MPC will soon need to decide whether to implement another big round of QE once the current GBP125bln programme is finished (around July 20-24 at the current pace).
“We expect the MPC will defer that decision to the August meeting, which is an Inflation
Report month. But, in order to defer that decision, the MPC may well make smaller – but still significant — decisions at the July meeting: (1) to extend QE on a tactical basis up to the August meeting if, as seems likely, the GBP125bln programme will finish two weeks before the August meeting; (2) to seek authorisation from the Chancellor to expand QE above GBP 150bln, to give the MPC the choice to extent QE if judged it is needed. In practice, we expect that the MPC will decide in August not to extend QE above GBP 125-150bln. As a result, the gilt buying programme is likely to end soon, and gilts are likely to have to re-price to attract sufficient demand,” note Citi analysts.