Bank of America

• BoA note that despite decent GDP data thus far, “headwinds to growth are building,…We see risks of more dovish minutes as a result”

• BoA think that that more stimulus from the BoE and/or government is “inevitable” and notes that “both plausible Brexit scenarios (skinny deal and no deal) are worse than its base-case assumption. This should, in time, make it more dovish”

• Continue to expect GBP100bln more QE and Bank Rate cut to 0% in November, “maximizing monetary stimulus without crossing the Rubicon of negative rates” but note that “given the downside growth risks we see, if the BoE does not cut Bank Rate to zero in November, we expect it to do so in 2021”.

• BoA expect a rate cut to -0.50% in the event of a no-deal Brexit.

 

Barclays

• We expect a unanimous vote to keep the Bank Rate unchanged, but think some dovish members are likely to dissent on QE by voting for more (most likely M Saunders and J Haskel). Hence, we pencil in a 7-2 vote split to keep purchases at the same level.

 

BNP

• Expect “one or two votes for more stimulus” in the form of either more QE or a rate cut. Note that “a vote for a negative Bank Rate next week as a risk, but it is not our central case.”

• BNP think that “the MPC will ultimately have to deliver more stimulus” and look for GBP100bln QE in November.

• Note that “if the UK was to leave without an agreement this year, or that this looked likely by the time of November’s meeting” BNP would then “also expect a 10bp cut in interest rates and possibly an even larger increase in QE.”

 

Deutsche Bank

• Deutsche Bank think that there is a “good chance that we get one (or maybe two) dissents with Saunders (and possibly Haskel) calling for additional stimulus”.

• Note that it was evident at last week’s TSC hearing that “many on the MPC already see risks to the Bank’s projections tilted to the downside” and that “Echoes of this…will be important confirmation that further easing is at hand.”

• Deutsche Bank continues to look for GBP60bln more QE in December “though risks are that this may be announced slightly earlier (at the November meeting).”

• Deutsche Bank reminds us that “Brexit was not mentioned once in the August minutes” so any mention of Brexit risks “will be important to watch for.”

 

HSBC

• HSBC note that with “the news has been good enough” for the MPC to stay on hold and look for a unanimous 9-0 vote for unchanged policy.

• However, HSBC point out that MPC member comments “appear to have become more downbeat.” And state that “This may indicate that they are trying to signal the possibility of further easing”.

• HSBC expect the Bank to keep unchanged policy until at least end 2021 and that “the BoE’s forecasts, market stability and low gilt yields mean the BoE might need some big downside risks to crystallise before it eases again.”

• However, HSBC concedes that “a more negative tone in the September minutes could open the door wider to further easing in November…[and] may consider a slow pace of purchases pre-emptively to prevent one from developing.”

 

JP Morgan

• JP Morgan notes that the MPC see QE and forward guidance as “its active tools for now” and that recent commentary has pointed to “risks of more stimulus in November are rising, and this week’s September meeting will offer further clues on where the committee is.”

• Expects that any dissent will be in the form of votes for more QE not rate cuts and note that Saunders could vote for more QE “potentially as soon as this week”

• JP Morgan states that it forecasts no easing at present but the odds of a QE extension “in the coming months are rising”. JP Morgan also states that it “will revisit [its] forecast after seeing the BoE’s communications from its meeting this week.”

• On Brexit, JP Morgan states that “The BoE will be looking at the elevated risks of a no-deal Brexit as a scenario in which it could ramp up purchases again with similar effect. This opens up the possibility of more QE later this year, with Bailey stating the BoE will be reviewing its Brexit assumptions at the November meeting.”

 

Morgan Stanley

• MS notes that “there has been too little change in the outlook to expect a different message at a nonforecast meeting compared to the August one” and looks for a unanimous 9-0 vote for no policy change “with a risk of an early Saunders vote for more QE.”

• MS look for “the more decisive MPC shift to supporting further easing is likely to follow the budget and Brexit resolution. This suggests that the November MPC may just agree a modest roll-forward of APF purchases, given the still fragile outlook, with a later shift, perhaps in February, to the full package. In the end, though, we expect another £100 billion of APF purchases, allowing the programme to run through 2021, and a rate cut to ZIRP.”

• MS describe the “modest roll forward” of QE to be “perhaps a GBP30bln top-up”.

• Furthermore MS state that “Given the MPC’s hawkish tone, and Bailey’s apparent aversion to further balance sheet expansion, the risks look tilted to less and later action compared to our forecasts.”

• MS continues to look for a 10bp Bank Rate cut to 0% in February.

 

NatWest Markets

• NatWest Markets expect a unanimous vote for no change in policy but “expect a more dovishly-toned set of Minutes which will fuel expectations of further QE around the turn of the year.” • NatWest Markets notes that “the probability of an uplift as soon as November 2020…has receded a little” but that it continues to look for GBP100bln QE by February 2021 and that “there is nothing to prevent further QE being sanctioned before the completion of the current round, or dissenting dovish votes for more QE”. • NatWest Markets also looks for another GBP100bln of QE in Q2-2021 bringing the stock of purchases up to GBP945bln. Although it sees no rate cuts in its base case it notes that “negative rates remain a significant risk”

 

Nomura

• “The risk is that one or more MPC members vote for more QE, just as external members Saunders and Haskel did one month ahead of the Bank’s majority- (but not unanimous-) decision to extend purchases in June this year.”

• Nomura continues to look for unchanged policy but notes that “the greatest chance of the MPC voting for an extension to its QE) at the Bank’s subsequent Monetary Policy Report meeting on 5 November rather than at this week’s meeting.” Pantheon • Expect GBP50bln more QE in November and a further GBP50bln in February bit note that the MPC “won’t tie its hands this month, given that the strength and durability of the recent economic rebound is difficult to read” and that QE is on “autopilot until December.” • Expects a unanimous on hold vote but sees biggest risk in Sep being a dovish dissent on the QE vote.

 

Rabobank

• Note that “as the purchases under the APF have slowed down considerably, an increase in the facility’s ceiling –currently set at GBP 745bn– is not imminent” at the September meeting.

• Expect another GBP100bln QE in November.

 

RBC

• RBC look for a 7-2 vote to keep QE unchanged as they “think some dovish members are likely to dissent on QE by voting for more (most likely M Saunders and J Haskel).”

• RBC notes that it expects monetary/fiscal announcements “to support the UK recovery to come over the autumn/winter.”

 

Soc Gen

• SocGen believes that “the vote this week may well not be unanimous. There is some chance that Saunders, along with Haskel, already votes for a further expansion of QE.”

• SocGen continue to believe the labour market is key but note “We are probably still sometime away from convincing evidence starting to emerge of a serious declining trend in employment; the MPC is likely to wait until then, probably November, before pressing the easing button again.”

• SocGen also point to Saunders as being a bellweather for the MPC stating “He was the first member of the MPC to espouse this idea of “risk management” which soon became the established doctrine of the MPC. His view is likely to be representative of the majority of MPC members at present.”

 

TD Securities

• TD Securities note that the September meeting “isn’t expected to be any kind of turning point…however, we do look for a slightly dovish turn, with more focus on the downside risks to growth going forward.”

• TD Securities “don’t expect to see any concrete decision on the future of the QE programme at this stage, as there’s still space for the programme to run until December at the current pace of purchases.”

• TD Securities “do not expect the BoE to validate hopes for any further near-term easing on rate cuts or asset purchases. If anything, we see them centering market expectations around our base case scenario of an additional £50 bn of QE alongside the November MPR.”

 

UBS

• UBS expects “the Committee is likely to retain its cautious tone and to warn that uncertainty around the outlook remains high, with risks skewed clearly to the downside. We think the MPC is also likely to emphasise that there is significant headroom to adjust the pace and size of QE if necessary.”

• Continue to look for GBP100bln QE in Nov to last until June 2021.

 

UniCredit

• UniCredit point to “better macro data, along with the fact that the September meeting comes only a little more than a month after the August Monetary Policy Report, should see the committee vote unanimously” for no change.

• Regarding the Minutes, UniCredit note that the tone “is likely to be dovish, given the huge uncertainty ahead and significant downside risks.”

• UniCredit look for GBP100bln more QE to be announced in November

 

James Sewell
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