The BOE may have a slightly more dovish stance tomorrow following wage data
At the last BOE meeting, Mark Carney laid out two scenarios for the possible path of monetary policy;
There's scope to loosen mon pol if spending growth slows more abruptly than expected
Rates could be tightened further than market perceives if wage growth picks up sharply
Item 1 is something to still watch for but number 2 is a complete bust, based on the lower wage gains we saw in the jobs report. The BOE are forecasting wage growth of 3.0% for 2017 so we're going to need to see some strong gains to even get close.
Despite the fact the jobs report was a good one in terms of employment, the wage data will give Carney the opportunity to trumpet that the UK economy is still facing risks and uncertainty.
Feb's meeting was a touch more upbeat on the fundamentals than previous meetings. 2017 growth got hiked to 2.0% from 1.4% and inflation expectations were raised. However, the market got a little ahead of itself into the meeting and inflation report, and we saw a sharp sell off in the pound. This time the market won't be expecting much from the meeting but I think there's a chance that we get some dovishly construed comments that could hurt the quid.
Carney has become a flag in the wind and so tends to move in whatever direction the economy is blowing. If we've just had good news, he's more neutral or hawkish, if it's bad news he turns more cautious and dovish.
I very much doubt he's going to start priming anything like actual rate cuts but he might just give extra emphasis to the point that the BOE can still lower rates if needed, while paying lesser lip service to hikes.
I shouldn't think there will be any waves made at this meeting but if there is, we shouldn't be surprised about where they come from.
How will Carney play this one?
