At the last BOE meeting headed by Mark Carney, the members voted 7-2 to leave the Bank rate unchanged at 0.75%. The members voted unanimously to maintain the purchase of government bonds at 435B pound and corporate bonds of 10B pound. The members maintained a neutral stance in the monetary policy outlook. British pound declines against euro and USD and disappointing retail sales.

On global developments, the members noted that growth has shown “tentative signs of stabilising and global financial conditions remain supportive”. Meanwhile, they noted that “the partial de-escalation of the US-China trade war provides some additional support to the outlook relative to the November Report, although trade tensions remain elevated”.

Domestically, BOE forecast growth to improve from “current below-potential rates”, amidst diminished Brexit uncertainty, easing of fiscal policy and modest recovery in global growth. Yet, the members admitted that growth would only rise “marginally” in 4Q19. Specifically, it warned of weak business investment and export orders, despite steady growth in household consumption. The freshly-released inflation data surprised the upside. Headline CPI steadied at +1.5% y/y, beating consensus of +1.4%, in November. Core CPI also steadied at +1.7% y/y, in line with expectations. As inflation stays in downtrend and is still below the +2% target, it should be affect BOE’s monetary policy stance. Retail sales grew +1% y/y in November. This is markedly lower than consensus of +2.1% and marks the weakest growth since April 2018. On monthly basis, retail sales has been in contraction the fourth consecutive month. Yet, the data has not covered Black day. The data can show stronger rebound in the coming month.

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Again, Jonathan Haskel and Michael Saunders dissented the decision as they proposed to lowest interest rate further. They judged that the economy was “a little softer than expected”, the amount of spare capacity is “rising” though still “modest”. They also took note of subdued core inflation. Meanwhile, they worried that employment growth was slowing. On the monetary policy stance, the central bank maintained a neutral tone. Besides noting that the current policy is “appropriate”, the members reiterated that monetary policy could respond in “either direction”.

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