Weekly Economic Data Preview

BoE MPC Minutes to Stay on Message with Inflation Report, but Watch Out for the Risk of a Split Vote

The key focus in the UK will be the publication of the MPC's minutes of the November policy meeting. Although the tone will draw heavily from the points already made in last week's Inflation Report, the debate ahead of the minutes will centre on whether the decision to extend the Asset Purchase Facility by £25bn was unanimous, or whether there was a split on the amount of expansion required. On balance, we think the risks are skewed towards a split vote on QE. On the data flow it's very much an inflation week, with October consumer price inflation figures published in the UK, the euro area and in the US. In terms of policy speeches, the week holds the potential for central bankers to shed more light on how the unwinding of unconventional monetary measures may play out over the coming months. There are three MPC, eight FOMC and seven ECB members scheduled to speak over the week.

November's BoE MPC minutes are published on Wednesday. Outside of Quarterly Inflation Report (QIR) months, the minutes provide the best distillation of the Committee's views. But being a QIR month, the detail of the minutes usually become a little less important, though not this time. We do expect them to deliver the same message as the QIR, which itself suggested that Bank Rate is likely to remain at its record low for a prolonged period and that the door is far from closed for the prospect of further QE. However, there is the risk of a split vote on the degree of the extension to the Asset Purchase Facility (APF). There could well be a handful of members who voted for a larger extension than the majority vote of £25bn. Recall that on the previous occasion QE was extended (by £50bn in August), the Governor was out-voted on his desire to extend the APF by £75bn to £200bn. Developments since then mean the APF has grown to that level anyway, so it is not clear whether King will have been out-voted in a similar way again, especially as there are signs the economy will exit recession in the current quarter. However, should it transpire that he was out-voted again, the market reaction could be significant. On UK dataflow, the CPI for October is released and the first rise in the headline rate of inflation for eight months (to 1.6% from 1.1% in September) is expected. In a busy week for UK financial markets, other releases include the November CBI industrial trends report and October figures for public borrowing, retail sales and the first estimate of M4 supply.

US figures this week are characterised by a mix of producer and consumer price data, alongside survey data from the Philadelphia Fed and the Empire manufacturing index. The headline CPI (Wednesday) is forecast to rise one basis point to -0.3% year-on-year in October and it may not be long before pressures further down the price chain gather momentum. Indeed, we expect producer price inflation (Tuesday) to have jumped by three-tenths to a -1.8% annual rate in October, the highest since February. There are eight FOMC members giving speeches, which may provide more colour on how the unwinding of unconventional policy measures could play out.

In the Eurozone this week, we expect the final inflation reading for the region in October (published today) to be confirmed at -0.1% year-on-year, up two-tenths from the prior month. The German PPI data (Friday) are expected to show a three-tenths rise in factory price inflation to -7.3% year-on-year. In an otherwise light week for European data, ECB rhetoric is therefore taking centre stage, with speeches from seven of the Governing Council.

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