UK MPC-ometer still suggesting hold
Simon Ward
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The “MPC-ometer” model followed here, which predicted that several members would press for additional stimulus at the February MPC meeting, continues to suggest another majority vote for no change next week – see previous post for more information about the model.
This prediction incorporates February consumer survey results released yesterday, showing stable confidence but another rise in price expectations – see chart. The final reading will depend on manufacturing and services purchasing managers’ surveys released tomorrow and on Tuesday – these would need to deteriorate sharply to trigger an easing forecast.
It is possible that the MPC’s “reaction function” has shifted dovishly but – as the previous post explained – the February vote was consistent with the Committee’s historical response to the data. A decision next week to expand QE or cut the interest rate on a portion of bank reserves, in contradiction to the model forecast, would be important evidence of such a regime shift.
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