New Star’s MPC-ometer model is forecasting a 7-2 vote for unchanged rates at this week’s meeting (two votes for a 25 b.p. cut). This is the same forecast as last month, when the actual vote turned out to be 8-1, with David Blanchflower the lone dove. <\/p>\n
Two key factors have steered the model away from predicting a cut this month. First, GDP was estimated to have grown by a robust 0.8% in the third quarter – the MPC has never eased following a number this strong. Secondly, survey-based measures of consumer and producer inflation expectations remain elevated. <\/p>\n
My personal view is that the vote will be closer than the model suggests. The “credit crunch” is difficult to analyse but there is a risk of a large negative impact, justifying giving lower-than-normal weight to recent economic strength. Also, three-month interbank interest rates remain at least 25 b.p. above where they should be at a 5.75% Bank rate, which could argue for an offsetting easing move. <\/p>\n
I like to compare the MPC-ometer’s forecasts with the vote of the Sunday Times Shadow MPC. The Shadow MPC was spot on with an 8-1 decision in October and has voted unanimously for unchanged rates this month. Over the last 13 months, the MPC-ometer’s average forecast error has been one vote (0.9 to be precise) versus three votes (2.6) for the Shadow MPC. <\/p>\n","protected":false},"excerpt":{"rendered":"
New Star’s MPC-ometer model is forecasting a 7-2 vote for unchanged rates at this week’s meeting (two votes for a 25 b.p. cut). This is the same forecast as last month, when the actual vote turned out to be 8-1, with David Blanchflower the lone dove. Two key factors have steered the model away from […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2491","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2491","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2491"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2491\/revisions"}],"predecessor-version":[{"id":4800,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/2491\/revisions\/4800"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2491"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2491"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2491"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}